Document ID: SEC-2010-0898-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2010-06-21T04:00Z

[Federal Register: June 21, 2010 (Volume 75, Number 118)]
[Notices]               
[Page 35113-35115]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21jn10-150]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62295; File No. SR-NASDAQ-2010-070]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NASDAQ Stock Market LLC To 
List Options on Trust Issued Receipts in $1 Strike Intervals

June 15, 2010.
    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 June 10, 2010 The NASDAQ Stock Market LLC (``NASDAQ'' 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 NASDAQ. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The NASDAQ Stock Market LLC proposes to amend Chapter IV, 
Securities Traded on NOM, Section 6, Series of Options Contracts Open 
for Trading, to allow the Exchange to list options on Trust Issued 
Receipts in $1 strike price intervals.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaq.cchwallstreet.com, at the principal 
office of the Exchange, on the Commission's Web site at http://
www.sec.gov, 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. 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 amend Chapter IV, 
Securities Traded on NOM, Section 6, Series of Options Contracts Open 
for Trading, by adding additional text to Section 6(d)(v) to allow the 
Exchange to list options on the Trust Issued Receipts (``TIRs''), 
including HOLding Company Depository ReceiptS (``HOLDRS''), as defined 
in Supplementary Material to Section 6 at .01(b), in $1 or greater 
strike price intervals, where the strike price is $200 or less and $5 
or greater where the strike price is greater than $200.\3\
---------------------------------------------------------------------------

    \3\ HOLDRS are a type of Trust Issued Receipt and the current 
proposal would permit $1 strikes for options on HOLDRS (where the 
strike price is less than $200).
---------------------------------------------------------------------------

    Currently, the strike price intervals for options on TIRs are as 
follows: (1) $2.50 or greater where the strike price is $25.00 or less; 
(2) $5.00 or greater where the strike price is greater than $25.00; and 
(3) $10.00 or greater where the strike price is greater than $200.\4\
---------------------------------------------------------------------------

    \4\ See Chapter IV, Section 6(d). See also Securities Exchange 
Act Release No. 61347 (January 13, 2010), 75 FR 3513 (January 21, 
2010) (SR-NASDAQ-2010-003).

---------------------------------------------------------------------------

[[Page 35114]]

    The Exchange is seeking to permit $1 strikes for options on TIRs 
(where the strike price is less than $200) because TIRs have 
characteristics similar to exchange-traded funds (``ETFs''). 
Specifically, TIRs are exchange-listed securities representing 
beneficial ownership of the specific deposited securities represented 
by the receipts. They are negotiable receipts issued by a trust 
representing securities of issuers that have been deposited and held on 
behalf of the holders of the TIRs. TIRs, which trade in round-lots of 
100, and multiples thereof, may be issued after their initial offering 
through a deposit with the trustee of the required number of shares of 
common stock of the underlying issuers. This characteristic of TIRs is 
similar to that of ETFs which also may be created on any business day 
upon receipt of the requisite securities or other investment assets 
comprising a creation unit. The trust only issues receipts upon the 
deposit of the shares of the underlying securities that are represented 
by a round-lot of 100 receipts. Likewise, the trust will cancel, and an 
investor may obtain, hold, trade or surrender TIRs in a round-lot and 
round-lot multiples of 100 receipts.
    Strike prices for ETF options are permitted in $1 or greater 
intervals where the strike price is $200 or less and $5 or greater 
where the strike is greater than $200.\5\ Accordingly, the Exchange 
believes that the rationale for permitting $1 strikes for ETF options 
equally applies to permitting $1 strikes for options on TIRs.
---------------------------------------------------------------------------

    \5\ See Chapter IV, Supplementary Material to Section 6 at 
.01(b), (permitting $1 strikes for options on Units covered under 
Section 6(d) also known as ETF options).
---------------------------------------------------------------------------

    The Exchange has analyzed its capacity and represents that it 
believes the Exchange and the Options Price Reporting Authority have 
the necessary system capacity to handle the additional traffic 
associated with the listing and trading of $1 strikes, where the strike 
price is less than $200, for options on TIRs.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \6\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \7\ 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, 
by allowing the Exchange to list options on TIRs at $1 strike price 
intervals. The Exchange believes that the marketplace and investors 
expect options on TIRs to trade in a similar manner to ETF options and 
this filing would allow the marketplace and investors the ability to 
trade options on TIRs. The Exchange further believes that investors 
will be better served if $1 strike price intervals are available for 
options on TIRs, where the strike price is less than $200.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not 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) of the Act \8\ and Rule 19b-
4(f)(6) thereunder.\9\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the self-regulatory organization to submit to the 
Commission 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. The Commission has waived the five-day pre-filing 
requirement in this case.
---------------------------------------------------------------------------

    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiver of the operative 
delay is consistent with the protection of investors and the public 
interest because the proposal is substantially similar to a rule of 
another exchange that has been approved by the Commission.\10\ 
Therefore, the Commission designates the proposal operative upon 
filing.\11\
---------------------------------------------------------------------------

    \10\ See Securities Exchange Release No. 34-62141 (May 20, 
2010), 75 FR 29787 (May 27, 2010) (SR-CBOE-2010-036).
    \11\ 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).
---------------------------------------------------------------------------

    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-NASDAQ-2010-070 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-2010-070. 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, 100 F 
Street, NE., Washington, DC 20549, on official business days between 
the hours of 10 a.m. and 3 p.m. 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

[[Page 35115]]

identifying information from submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NASDAQ-2010-070 and should be submitted 
on or before July 12, 2010.

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

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

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-14964 Filed 6-18-10; 8:45 am]
BILLING CODE 8010-01-P