Document ID: SEC-2010-1127-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2010-07-26T04:00Z

[Federal Register: July 26, 2010 (Volume 75, Number 142)]
[Notices]               
[Page 43594-43595]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26jy10-102]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62530; File No. SR-Phlx-2010-96]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating 
to Trading Halts in Options During a Trading Pause in the Underlying 
Securities

July 19, 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 July 14, 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 Phlx 
Rule 1047 (Trading Rotations, Halts and Suspensions) to enhance the 
recently-implemented options halt rule whenever trading in the 
underlying security has been paused by the primary listing market (the 
``options halt rule'').\3\
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    \3\ The options halt rule is also known as the options pause 
rule.
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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 Rule 1047 to enhance the 
recently-implemented options halt rule to indicate that if trading has 
not been resumed on the primary listing market for the underlying 
security once ten minutes has passed after an underlying security was 
paused, the Exchange may resume options trading if trading has resumed 
on at least one national securities exchange; and that the Exchange 
will continue certain processes during the halt (maintain booked 
orders, accept orders, and process cancels).
    On June 10, 2010, the Exchange filed an immediately effective 
proposal to establish the options halt rule in new subsection (e) to 
Rule 1047.\4\ Subsection (e) states that trading on the Exchange in any 
option contract shall be halted whenever trading in the underlying 
security has been paused by the primary listing market. The rule states 
further that trading in such halted options contracts may be resumed 
upon a determination by the Exchange that the conditions that led to 
the pause are no longer present and that the interests of a fair and 
orderly market are best served by a resumption of trading, which in no 
circumstances will be before the Exchange has received notification 
that the underlying security has resumed trading on at least one 
exchange.
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    \4\ See Securities Exchange Act Release No. 62269 (June 10, 
2010), 75 FR 34491, (June 17, 2010) (Phlx-2010-82)(notice of filing 
and immediate effectiveness regarding options halt rule). The 
Exchange proposed the options halt rule after consultation with 
Commission staff regarding uniform market-wide trading pause 
standards for certain individual stocks that experience rapid price 
movement and for individual equity options overlying those stocks. 
For a similar options halt rule proposed by another options 
exchange, see Securities Exchange Act Release No. 62270 (June 10, 
2010), 75 FR 34510, (June 17, 2010) (NASDAQ-2010-071) (notice of 
filing and immediate effectiveness regarding options halt rule).
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    On the same day as the Exchange's options halt rule filing, Chicago 
Board Options Exchange (``CBOE'') filed an options halt that is similar 
to the Exchange's options halt rule but has some additional 
elements.\5\ The Exchange's current filing is based on the CBOE filing.
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    \5\ The additional elements include the following: that if 
trading has not been resumed on the primary listing market for the 
underlying security once ten minutes passed after an underlying 
security was paused, the Exchange may resume options trading if at 
least one market has resumed trading in the underlying; and that the 
Exchange will continue certain processes during the halt (maintain 
booked orders, accept orders, and process cancels). See Securities 
Exchange Act Release No. 62272 (June 10, 2010), 75 FR 34509, (June 
17, 2010) (CBOE 2010-055).
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    The Exchange believes that it should continue certain processes and 
procedures independently of an options trading halt. Specifically, the 
Exchange proposes to state in Rule 1047(e)(ii) that during the options 
halt, the Exchange will maintain existing orders on the book, accept 
orders, and process cancels.
    Moreover, the Exchange believes that it should have the ability to 
resume options trading within certain parameters after an underlying 
halt. Specifically, The Exchange proposes to state in subsection (e)(i) 
that if trading has not been resumed on the primary listing market for 
the underlying security after ten minutes have passed

[[Page 43595]]

since the underlying security was paused by the primary listing market, 
the Exchange may resume trading in options contracts if the underlying 
security has resumed trading on at least one national securities 
exchange.\6\
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    \6\ No changes to the Exchange's trading processes are otherwise 
contemplated by this proposal. For example, transactions that occur 
between the time the pause is imposed on the listing market and the 
halt is processed on PHLX may be nullified pursuant to Rule 
1092(c)(iv)(B). And orders in the affected option that are received 
during the halt on the Exchange will be treated as pre-opening 
orders and will be included in the re-opening process upon the 
resumption of trading on the listing market for the underlying 
security pursuant to Rule 1017(h).
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    The Exchange believes that the proposals, individually and 
together, enhance and strengthen the options halt rule and its 
application. The proposals will be immediately implemented upon 
effectiveness of the filing.
    The Exchange believes that the options halt rule as amended ensures 
that the Exchange has the ability to maintain fair and orderly markets 
in options upon the imposition of a single stock trading pause by the 
listing market for the underlying security.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \7\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \8\ 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. Specifically, the Exchange 
believes that the proposal benefits customers by enhancing the current 
options halt rule to clarify the circumstances under which the Exchange 
may resume options trading, and that the Exchange will continue certain 
order processing and cancellation functions during a halt.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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) \9\ of the Act and Rule 19b-4(f)(6)(iii) thereunder \10\ 
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. The Exchange has asked the Commission to 
waive the 30-day operative delay so that the proposal may become 
operative upon filing. The Commission notes that the proposed rule 
change clarifies certain aspects of the Exchange's rule regarding how 
orders will be handled during options trading halts caused by a pause 
in the trading of the underlying security and also clarifies when the 
Exchange may resume trading when a trading pause in the underlying 
security is prolonged for unknown reasons. The proposed rule change 
does not raise any new substantive issues. For these reasons, the 
Commission believes that the waiver of the 30-day operative delay is 
consistent with the protection of investors and the public 
interest.\11\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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.
    \11\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rule's 
impact on efficiency, competition and capital formation. 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-Phlx-2010-96 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-2010-96. 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-2010-96 and 
should be submitted on or before August 16, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-18166 Filed 7-23-10; 8:45 am]
BILLING CODE 8010-01-P