Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Position and Exercise Limits on IWM Options, 18846-18848 [E8-7145]
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18846
Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Notices
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
OCC’s principal office and on OCC’s
web site (https://www.theocc.com/
publications/rules/proposed_changes/
proposed_changes.jsp). 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–OCC–2007–
16 and should be submitted on or before
April 28, 2008.
For the Commission by the Division of
Trading and Markets pursuant to delegated
authority.12
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–7120 Filed 4–4–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57597; File No. SR–Phlx–
2008–24]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change Relating to Position and
Exercise Limits on IWM Options
rfrederick on PROD1PC67 with NOTICES
April 1, 2008.
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 28,
2008, the Philadelphia Stock Exchange,
Inc. (‘‘Exchange’’ or ‘‘Phlx’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been substantially prepared by the
12 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Exchange. The Exchange has designated
this proposal as non-controversial under
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder,4 which
renders the proposed rule change
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Phlx Rule 1001, Position Limits, to
establish increased position limits of
500,000 for options (‘‘IMW Options’’) on
the exchange-traded fund (‘‘ETF’’)
overlying the iShares Russell 2000
Index (‘‘IWM’’). The text of the rule
proposal is available on the Exchange’s
Web site (https://www.phlx.com), at the
offices 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 the proposed rule
change is to establish in Phlx Rule 1001
increased position limits of 500,000
contracts for IWM Options, which
should encourage a more liquid and
competitive market environment to the
benefit of customers interested in the
product.
About a year ago, the IWM Options
position limit was increased to 500,000
contracts pursuant to a CBOE and ISE
pilot program (the ‘‘IWM Pilot’’).5 The
3 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
5 The proposal that established the IWM Pilot was
designated to be effective and operative upon filing.
See, e.g., Securities Exchange Act Release Nos.
55176 (January 25, 2007), 72 FR 4741 (February 1,
2007) (SR–CBOE–2007–08) and 55175 (January 25,
2007), 72 FR 4753 (February 1, 2007) (SR–ISE–
2007–07). The IWM Pilot was extended through
4 17
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Sfmt 4703
Commission recently permanently
approved this position limit pilot.6 The
Exchange now seeks to similarly
increase its position limit on IWM
Options to 500,000 contracts.7
Although position limits have lately
enjoyed permanent expansion, there has
been a steadfast and significant increase
over the last decade in the overall
volume of exchange-traded options. Part
of this volume is attributable to a
corresponding increase in the number of
overall market participants. This growth
in market participation has in turn
brought about additional depth and
increased liquidity in exchange-traded
options.
As the anniversary of listed options
trading approaches its 35th year, the
Exchange believes that the existing
surveillance procedures and reporting
requirements at the Exchange, at other
options exchanges, and at the several
clearing firms are capable of properly
identifying unusual and/or illegal
trading activity. These procedures
include daily monitoring of market
movements via automated surveillance
techniques to identify unusual activities
in both options and underlying stocks
and ETFs.
The current financial requirements
imposed by the Exchange and by the
Commission should address any
concerns that a member or its customer
March 1, 2008. See Securities Exchange Act Release
Nos. 57141 (January 14, 2008), 73 FR 3496 (January
18, 2008) (SR–CBOE–2007–147) and 57144 (January
14, 2008), 73 FR 3785 (January 22, 2008) (SR–ISE–
2008–03). The Exchange did not participate in the
pilot program.
6 See Securities Exchange Act Release No. 57352
(February 19, 2008), 73 FR 10076 (February 25,
2008) (SR–CBOE–2008–07). Other options
exchanges similarly have a 500,000 contract IWM
Options position limit. See Securities Exchange Act
Release Nos. 57415 (March 3, 2008), 73 FR 12479
(March 7, 2008) (SR–Amex–2008–16); 57414
(March 3, 2008), 73 FR 12481 (March 7, 2008) (SR–
BSE–2008–12); 57416 (March 3, 2008), 73 FR 12489
(March 7, 2008) (SR–ISE–2008–20); and 57417
(March 3, 2008), 73 FR 12788 (March 10, 2008) (SR–
NYSEArca–2008–26). Position limit increases for
other option products have also been approved
recently. See Securities Exchange Release No.
57418 (March 3, 2008), 73 FR 12493 (March 7,
2008) (SR–Phlx–2008–14) (QQQQs position limit).
7 Phlx Rule 1002, which the Exchange does not
propose to amend, establishes exercise limits for
equity options at the same levels as the applicable
position limits. Phlx Rule 1002 states in part that
‘‘no member or member organization shall exercise,
for any account in which such member or member
organization has an interest or for the account of
any partner, officer, director or employee thereof or
for the account of any customer, a long position in
any option contract of a class of options dealt in on
the Exchange * * * if as a result thereof such
member or member organization, or partner, officer,
director or employee thereof or customer, acting
alone or in concert with others, directly or
indirectly, has or will have exercised within any
five (5) consecutive business days aggregate long
positions in that class (put or call) as set forth as
the position limit in Rule 1001 * * * ’’
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Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Notices
may try to maintain an inordinately
large unhedged position in an equity
option. As an example, the Exchange
requires that each member or member
organization that maintains a position
on the same side of the market in excess
of 10,000 contracts in a class of options
for its own account or for the account
of a customer report certain information.
This data would include, but not be
limited to, whether such position is
hedged and if so, documentation as to
how the position is hedged.8
The Exchange believes that its
surveillance procedures and reporting
procedures, in conjunction with the
financial requirements and risk
management review procedures already
in place at the clearing firms and the
Options Clearing Corporation, should
serve to adequately address any
concerns the Commission may have
respecting account(s) engaging in
manipulative schemes or assuming too
high a level of risk exposure.
Accordingly, the Exchange believes that
its surveillance and financial
requirements are adequate to effectively
monitor the proposed increase in
position limits for IWM Options on a
going forward basis.
The Exchange expects continued
options volume growth as opportunities
for investors to participate in options
markets increase and evolve. The
Exchange believes that establishing the
proposed expanded position limits for
IWM Options, as currently available to
other options exchanges, should allow
market participants to more effectively
achieve their investment and hedging
objectives.
rfrederick on PROD1PC67 with NOTICES
2. Statutory Basis
The Exchange believes that the
proposal is consistent with the
requirements of Section 6(b) of the Act 9
in general, and Section 6(b)(5) of the
Act 10 in particular, in that it is designed
to foster cooperation and coordination
with persons engaged in regulating,
clearing, settling, processing
information with respect to, and
facilitating transactions in securities; 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 proposed rule
change would enable the Exchange to
8 Exchange market-makers may be exempt from
this reporting requirement to the extent that marketmaker information can be accessed through the
Exchange’s market surveillance systems. See Phlx
Rule 1003. The rule also contains general reporting
requirements for customer accounts that maintain a
position in excess of 200 contracts.
9 15 U.S.C. 78f(b).
10 15 U.S.C. 78f(b)(5).
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have the same position limits for IWM
Options that are already available to
other options exchanges.11
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 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
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has designated the
proposed rule change as one that: (1)
Does not significantly affect the
protection of investors or the public
interest; (2) does not impose any
significant burden on competition; and
(3) does not become operative for 30
days from the date of filing, or such
shorter time as the Commission may
designate if consistent with the
protection of investors and the public
interest. Therefore, the foregoing rule
change has become effective pursuant to
Section 19(b)(3)(A) of the Act 12 and
subparagraph (f)(6) of Rule 19b–4
thereunder.13 The Exchange notes that
the proposed rule change is based on a
similar proposal recently approved by
the Commission,14 and does not raise
any novel issues.
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 Exchange
states that waiving the operative delay
will allow the proposed increase in the
position and exercise limits applicable
to options on IWM on Phlx to be put
into effect immediately, which will
align Phlx’s IWM limits with the IWM
limits applicable to members of other
options exchanges, thereby promoting
conformity and uniformity in the rules
of the several options exchanges.
11 See
supra note 6.
U.S.C. 78s(b)(3)(A).
13 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. The
Exchange has fulfilled this requirement.
14 See Securities Exchange Act Release No. 57352,
supra note 6.
12 15
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18847
The Commission believes that
waiving the 30-day operative delay of
the Exchange’s proposal is consistent
with the protection of investors and the
public interest.15 Therefore, the
Commission designates the proposal to
be operative upon filing.
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
the 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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
No. SR–Phlx–2008–24 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–Phlx–2008–24. 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 Commissions
Internet Web site (https://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
15 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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18848
Federal Register / Vol. 73, No. 67 / Monday, April 7, 2008 / Notices
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
Number SR–Phlx–2008–24 and should
be submitted on or before April 28,
2008.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Nasdaq proposes to establish pricing
for trading standardized equity and
index options on The NASDAQ Options
Market (‘‘NOM’’), Nasdaq’s facility for
the trading of standardized equity and
index options. Nasdaq will implement
this rule change on March 31, 2008, the
expected launch date for NOM. The text
of the proposed rule change is available
at https://www.complinet.com/nasdaq,
the principal offices of the Exchange,
and the Commission’s Public Reference
Room.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–7145 Filed 4–4–08; 8:45 am]
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.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57599; File No. SR–
NASDAQ–2008–027]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Establish
Fees for Trading on The NASDAQ
Options Market
rfrederick on PROD1PC67 with NOTICES
April 1, 2008.
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 27,
2008, The NASDAQ Stock Market LLC
(‘‘Nasdaq’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I, II and III below, which Items
have been prepared substantially by
Nasdaq. Nasdaq has designated this
proposal as one establishing or changing
a member due, fee, or other charge
imposed by Nasdaq under Section
19(b)(3)(A)(ii) of the Act 3 and Rule 19b–
4(f)(2) thereunder,4 which renders the
proposal effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
16 17
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Nasdaq is introducing fees and credits
for the execution of options contracts
within NOM. The fees are based on the
pricing model currently in place for the
trading of equities via the Nasdaq
Market Center, with variations to reflect
Nasdaq’s understanding of the different
competitive conditions in the markets
that trade options.
Specifically, Nasdaq will assess fees
for the execution of options contracts
based upon which member provides
liquidity to the market and which
member takes liquidity from the market.
This model seeks to attract liquidity to
NOM by providing credits to members
that provide liquidity, and to assess a
fee to the member whose order executes
against an order that has provided
liquidity. An order that provides
liquidity is any order that is entered into
NOM and is placed on the NOM book
for potential execution. An order that
takes liquidity is one that is entered into
NOM and that executes against an order
resting on the NOM book. In the case of
the NOM Closing Cross, all orders
entered during the continuous market or
entered as Imbalance Only orders will
be considered liquidity providers and
PO 00000
Frm 00117
Fmt 4703
Sfmt 4703
all On Close orders will be considered
liquidity takers.
For all executions except the NOM
Opening Cross, the fee for liquidity
takers will be $0.45 per executed
contract and the rebate for liquidity
providers will be $0.30 per executed
contract. For orders executed in the
NOM Opening Cross, the fee will be
$0.05 per contract for each side of the
transaction. Executions in the Opening
Cross are not susceptible to the liquidity
provider and taker analysis described
above because NOM will not place
orders on its book prior to the opening
of the market. Instead, NOM will place
orders on the book just prior to and in
anticipation of the execution of the
NOM Opening Cross. In light of this
difference, Nasdaq has concluded that
charging all members equally for the
execution of their orders in the NOM
Opening Cross is the fairest way to
allocate fees.
Nasdaq will assess a routing fee for
orders that are executed at another
options market based upon the cost to
Nasdaq of executing such orders at
those markets. In order to reflect
Nasdaq’s cost of execution at away
markets, the proposed fees are separated
by type of option (penny pilot, equity/
non-penny pilot, ETF or HLDS/nonpenny pilot, and Index) and vary
depending upon whether the order is
being routed for a customer, a member
firm, or a registered market maker. In
addition, Nasdaq will pass-through
surcharges that are assessed by other
markets for the execution of specific
options orders on specific underlying
instruments.
These options are separated into three
tiers by level of surcharge and the
options included in each tier are listed
in an Options Trader Alert and also
posted on the NasdaqTrader.com
website.5 A copy of the posted fee
schedule is attached as Exhibit 2 to
Nasdaq’s rule filing. Nasdaq believes
that these routing fees and surcharges
are competitive, fair and reasonable, and
non-discriminatory in that they
approximate the cost to Nasdaq of
executing routed orders at an away
market. As with all fees, Nasdaq may
adjust these routing fees in response to
competitive conditions by filing a new
proposed rule change.
5 See Options Trader Alert 2008–001 (March 12,
2008) (announcing SEC approval of The NASDAQ
Options Market rule proposal), at https://
www.nasdaqtrader.com/TraderNews.
aspx?id=OTA2008–001; https://
www.nasdaqtrader.com/Trader.aspx?
id=PriceListTrading2#nq_optionsex.
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]]>Agencies
[Federal Register Volume 73, Number 67 (Monday, April 7, 2008)]
[Notices]
[Pages 18846-18848]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-7145]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57597; File No. SR-Phlx-2008-24]
Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to Position and Exercise Limits on IWM Options
April 1, 2008.
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 28, 2008, the Philadelphia Stock Exchange, Inc. (``Exchange''
or ``Phlx'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been substantially prepared by the Exchange.
The Exchange has designated this proposal as non-controversial under
Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6)
thereunder,\4\ which renders the proposed rule change effective upon
filing with the Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Phlx Rule 1001, Position Limits, to
establish increased position limits of 500,000 for options (``IMW
Options'') on the exchange-traded fund (``ETF'') overlying the iShares
Russell 2000 Index (``IWM''). The text of the rule proposal is
available on the Exchange's Web site (https://www.phlx.com), at the
offices 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 the proposed rule change is to establish in Phlx
Rule 1001 increased position limits of 500,000 contracts for IWM
Options, which should encourage a more liquid and competitive market
environment to the benefit of customers interested in the product.
About a year ago, the IWM Options position limit was increased to
500,000 contracts pursuant to a CBOE and ISE pilot program (the ``IWM
Pilot'').\5\ The Commission recently permanently approved this position
limit pilot.\6\ The Exchange now seeks to similarly increase its
position limit on IWM Options to 500,000 contracts.\7\
---------------------------------------------------------------------------
\5\ The proposal that established the IWM Pilot was designated
to be effective and operative upon filing. See, e.g., Securities
Exchange Act Release Nos. 55176 (January 25, 2007), 72 FR 4741
(February 1, 2007) (SR-CBOE-2007-08) and 55175 (January 25, 2007),
72 FR 4753 (February 1, 2007) (SR-ISE-2007-07). The IWM Pilot was
extended through March 1, 2008. See Securities Exchange Act Release
Nos. 57141 (January 14, 2008), 73 FR 3496 (January 18, 2008) (SR-
CBOE-2007-147) and 57144 (January 14, 2008), 73 FR 3785 (January 22,
2008) (SR-ISE-2008-03). The Exchange did not participate in the
pilot program.
\6\ See Securities Exchange Act Release No. 57352 (February 19,
2008), 73 FR 10076 (February 25, 2008) (SR-CBOE-2008-07). Other
options exchanges similarly have a 500,000 contract IWM Options
position limit. See Securities Exchange Act Release Nos. 57415
(March 3, 2008), 73 FR 12479 (March 7, 2008) (SR-Amex-2008-16);
57414 (March 3, 2008), 73 FR 12481 (March 7, 2008) (SR-BSE-2008-12);
57416 (March 3, 2008), 73 FR 12489 (March 7, 2008) (SR-ISE-2008-20);
and 57417 (March 3, 2008), 73 FR 12788 (March 10, 2008) (SR-
NYSEArca-2008-26). Position limit increases for other option
products have also been approved recently. See Securities Exchange
Release No. 57418 (March 3, 2008), 73 FR 12493 (March 7, 2008) (SR-
Phlx-2008-14) (QQQQs position limit).
\7\ Phlx Rule 1002, which the Exchange does not propose to
amend, establishes exercise limits for equity options at the same
levels as the applicable position limits. Phlx Rule 1002 states in
part that ``no member or member organization shall exercise, for any
account in which such member or member organization has an interest
or for the account of any partner, officer, director or employee
thereof or for the account of any customer, a long position in any
option contract of a class of options dealt in on the Exchange * * *
if as a result thereof such member or member organization, or
partner, officer, director or employee thereof or customer, acting
alone or in concert with others, directly or indirectly, has or will
have exercised within any five (5) consecutive business days
aggregate long positions in that class (put or call) as set forth as
the position limit in Rule 1001 * * * ''
---------------------------------------------------------------------------
Although position limits have lately enjoyed permanent expansion,
there has been a steadfast and significant increase over the last
decade in the overall volume of exchange-traded options. Part of this
volume is attributable to a corresponding increase in the number of
overall market participants. This growth in market participation has in
turn brought about additional depth and increased liquidity in
exchange-traded options.
As the anniversary of listed options trading approaches its 35th
year, the Exchange believes that the existing surveillance procedures
and reporting requirements at the Exchange, at other options exchanges,
and at the several clearing firms are capable of properly identifying
unusual and/or illegal trading activity. These procedures include daily
monitoring of market movements via automated surveillance techniques to
identify unusual activities in both options and underlying stocks and
ETFs.
The current financial requirements imposed by the Exchange and by
the Commission should address any concerns that a member or its
customer
[[Page 18847]]
may try to maintain an inordinately large unhedged position in an
equity option. As an example, the Exchange requires that each member or
member organization that maintains a position on the same side of the
market in excess of 10,000 contracts in a class of options for its own
account or for the account of a customer report certain information.
This data would include, but not be limited to, whether such position
is hedged and if so, documentation as to how the position is hedged.\8\
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\8\ Exchange market-makers may be exempt from this reporting
requirement to the extent that market-maker information can be
accessed through the Exchange's market surveillance systems. See
Phlx Rule 1003. The rule also contains general reporting
requirements for customer accounts that maintain a position in
excess of 200 contracts.
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The Exchange believes that its surveillance procedures and
reporting procedures, in conjunction with the financial requirements
and risk management review procedures already in place at the clearing
firms and the Options Clearing Corporation, should serve to adequately
address any concerns the Commission may have respecting account(s)
engaging in manipulative schemes or assuming too high a level of risk
exposure. Accordingly, the Exchange believes that its surveillance and
financial requirements are adequate to effectively monitor the proposed
increase in position limits for IWM Options on a going forward basis.
The Exchange expects continued options volume growth as
opportunities for investors to participate in options markets increase
and evolve. The Exchange believes that establishing the proposed
expanded position limits for IWM Options, as currently available to
other options exchanges, should allow market participants to more
effectively achieve their investment and hedging objectives.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act \9\ in general, and Section
6(b)(5) of the Act \10\ in particular, in that it is designed to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities; 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 proposed rule change would enable the Exchange to have the same
position limits for IWM Options that are already available to other
options exchanges.\11\
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ See supra note 6.
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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 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
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has designated the proposed rule change as one that:
(1) Does not significantly affect the protection of investors or the
public interest; (2) does not impose any significant burden on
competition; and (3) does not become operative for 30 days from the
date of filing, or such shorter time as the Commission may designate if
consistent with the protection of investors and the public interest.
Therefore, the foregoing rule change has become effective pursuant to
Section 19(b)(3)(A) of the Act \12\ and subparagraph (f)(6) of Rule
19b-4 thereunder.\13\ The Exchange notes that the proposed rule change
is based on a similar proposal recently approved by the Commission,\14\
and does not raise any novel issues.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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. The Exchange has fulfilled this requirement.
\14\ See Securities Exchange Act Release No. 57352, supra note
6.
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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 Exchange states that waiving the operative
delay will allow the proposed increase in the position and exercise
limits applicable to options on IWM on Phlx to be put into effect
immediately, which will align Phlx's IWM limits with the IWM limits
applicable to members of other options exchanges, thereby promoting
conformity and uniformity in the rules of the several options
exchanges.
The Commission believes that waiving the 30-day operative delay of
the Exchange's proposal is consistent with the protection of investors
and the public interest.\15\ Therefore, the Commission designates the
proposal to be operative upon filing.
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\15\ 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 the proposed rule
change, the Commission may summarily abrogate the 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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File No. SR-Phlx-2008-24 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2008-24. 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 Commissions Internet Web site (https://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
[[Page 18848]]
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 Number SR-
Phlx-2008-24 and should be submitted on or before April 28, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
Florence E. Harmon,
Deputy Secretary.
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\16\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E8-7145 Filed 4-4-08; 8:45 am]
BILLING CODE 8011-01-P
