Document ID: SEC-2009-1520-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Order Approving Proposed Rule Change by NASDAQ OMX PHLX, Inc. Regarding Listing Certain Options at $1 Strike Price Intervals Below $200 and Listing Certain Options at $2.50 Strike Price Intervals Below $200
Posted Date: 2009-10-28T04:00Z

[Federal Register: October 28, 2009 (Volume 74, Number 207)]
[Notices]               
[Page 55593-55594]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28oc09-122]                         

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60840; File No. SR-Phlx-2009-77]

 
Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by NASDAQ OMX PHLX, Inc. Regarding Listing Certain Options at $1 
Strike Price Intervals Below $200 and Listing Certain Options at $2.50 
Strike Price Intervals Below $200

October 20, 2009.
    On September 4, 2009, NASDAQ OMX PHLX, Inc. (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities 
Exchange Act of 1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ a 
proposed rule change to permit the listing of certain option series at 
$1 and $2.50 strike price intervals for strike prices below $200. The 
proposed rule change was published for comment in the Federal Register 
on September 16, 2009.\4\ There were no comments on the proposed rule 
change. This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 60637 (September 9, 
2009), 74 FR 47634 (``Notice'').
---------------------------------------------------------------------------

    The Exchange proposes to amend Phlx Rules 1012 and 1101A to permit 
the Exchange to list eight index options (the ``$1 Indexes'') at $1 
strike price intervals below $200.\5\ The Exchange believes that $1 
strike price intervals in these option series will provide investors 
with greater flexibility by allowing them to establish positions that 
are better tailored to meet their investment objectives. The Exchange 
also proposes to amend Rule 1101A to permit the Exchange to list 
options on two indexes at $2.50 strike price intervals below $200.\6\
---------------------------------------------------------------------------

    \5\ The Exchange is proposing $1 strike price intervals for the 
following sector indexes: PHLX Gold/Silver Index (XAU), PHLX Housing 
Index (HGX), PHLX Oil Service Index (OSX), SIG Oil Exploration & 
Production IndexTM (EPXSM), PHLX Semiconductor 
Index (SOX), KBW Bank Index (BKX),\5\ SIG Energy MLP 
IndexSM (SVOTM), and Reduced Value Russell 
2000[supreg] Index (RMN).
    \6\ The Exchange is proposing $2.50 strike price intervals for 
the following sector indexes: The NASDAQ China IndexSM 
(CNZ) and the Reduced Value Russell 2000[supreg] Index (RMN).
---------------------------------------------------------------------------

    For initial series in options on the $1 Indexes, the Exchange will 
list at least two strike prices above and two strike prices below the 
current value of the $1 Index at or about the time a series is opened 
for trading on the Exchange. Series listed at the time of initial 
listing must be within five (5) points of the closing value of the $1 
Index on the preceding day. The Exchange will be permitted to list up 
to sixty (60) additional series, subject to certain guidelines,\7\ when 
the Exchange deems it necessary to maintain an orderly market, to meet 
customer demand, or when the underlying $1 Index moves substantially 
from the initial exercise price or prices. In all cases, however, $1 
strike price intervals may be listed on $1 Index options only where the 
strike price is less than $200. The Exchange is also proposing to set 
forth a delisting

[[Page 55594]]

policy with respect to $1 Index options.\8\
---------------------------------------------------------------------------

    \7\ Additional strike prices shall be within thirty percent 
(30%) above or below the closing value of the $1 Index; however, the 
Exchange will be permitted to open additional strike prices that are 
more than 30% above or below the current $1 Index value provided 
that demonstrated customer interest exists for such series, as 
expressed by institutional, corporate or individual customers or 
their brokers. Market-Makers trading for their own account will not 
be considered when determining customer interest. See Proposed Rule 
1101A Commentary .03(b).
    \8\ For each $1 Index the Exchange will regularly review series 
that are outside a range of five (5) strikes above and five (5) 
strikes below the current value of the $1 Index and may 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. 
However, customer requests to add strikes and/or maintain strikes in 
$1 Index options in series eligible for delisting may be granted.
---------------------------------------------------------------------------

    After careful review, the Commission finds that the proposed rule 
change is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\9\ In 
particular, the Commission believes that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\10\ which requires, among 
other things, that the rules of a national securities exchange be 
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.
---------------------------------------------------------------------------

    \9\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b).
---------------------------------------------------------------------------

    The Exchange stated in its proposal that it has received numerous 
requests from traders of the $1 Index options for series listed in $1 
strike price increments. The Exchange believes that allowing the 
listing of these options at $1 increments as proposed, particularly 
given the recent decline in values of the $1 Indexes, should provide 
investors with added flexibility in the trading of options and further 
the public interest by allowing investors to establish positions that 
are better tailored to meet their investment objectives.
    The Commission notes that the Exchange has analyzed its capacity 
and represented its belief that it and the Options Price Reporting 
Authority have the necessary systems capacity to handle the additional 
traffic associated with listing and trading $1 strike intervals options 
series on the $1 Indexes.
    In light of the foregoing, the Commission believes that the 
proposal strikes a reasonable balance between the Exchange's desire to 
accommodate market participants by offering a wider array of investment 
opportunities and the need to avoid unnecessary proliferation of 
options series and the corresponding increase in quotes. The Commission 
expects that the Exchange will 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.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\11\ that the proposed rule change (SR-Phlx-2009-77) be, and it 
hereby is, approved.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-25826 Filed 10-27-09; 8:45 am]

BILLING CODE 8011-01-P