Self-Regulatory Organizations; Notice of Filing of 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, 47634-47636 [E9-22243]

Download as PDF 47634 Federal Register / Vol. 74, No. 178 / Wednesday, September 16, 2009 / Notices 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 Number SR–FINRA–2009–056 on the subject line. Paper Comments srobinson on DSKHWCL6B1PROD with NOTICES • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. SECURITIES AND EXCHANGE COMMISSION the most significant aspects of such statements. [Release No. 34–60637; File No. SR–Phlx– 2009–77] A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change Self-Regulatory Organizations; Notice of Filing of 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 September 9, 2009. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’)1, and Rule 19b–4 2 thereunder, All submissions should refer to File notice is hereby given that on Number SR–FINRA–2009–056. This file September 4, 2009, NASDAQ OMX number should be included on the PHLX, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed subject line if e-mail is used. To help the with the Securities and Exchange Commission process and review your Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described comments more efficiently, please use only one method. The Commission will in Items I, II, and III below, which Items post all comments on the Commission’s have been prepared by the Exchange. The Commission is publishing this Internet Web site (https://www.sec.gov/ notice to solicit comments on the rules/sro.shtml). Copies of the proposed rule change from interested submission, all subsequent persons. amendments, all written statements with respect to the proposed rule I. Self-Regulatory Organization’s change that are filed with the Statement of the Terms of Substance of Commission, and all written the Proposed Rule Change communications relating to the The Exchange proposes to amend proposed rule change between the Phlx Rules 1012 (Series of Options Commission and any person, other than Open for Trading) and 1101A (Terms of those that may be withheld from the Option Contracts) regarding listing public in accordance with the certain options at $1 strike price provisions of 5 U.S.C. 552, will be intervals below $200. The proposal also available for inspection and copying in amends Rule 1101A regarding listing the Commission’s Public Reference certain options on indexes at $2.50 Room, 100 F Street, NE., Washington, strike price intervals below $200. DC 20549, on official business days The text of the proposed rule change between the hours of 10 a.m. and 3 p.m. is available on the Exchange’s Web site Copies of such filing also will be at https:// available for inspection and copying at nasdaqomxphlx.cchwallstreet.com/ NASDAQOMXPHLX/Filings/, at the the principal office of FINRA. All principal office of the Exchange, and at comments received will be posted the Commission’s Public Reference without change; the Commission does Room. not edit personal identifying information from submissions. You II. Self-Regulatory Organization’s should submit only information that Statement of the Purpose of, and you wish to make publicly available. All Statutory Basis for, the Proposed Rule submissions should refer to File Change Number SR–FINRA–2009–056 and In its filing with the Commission, the should be submitted on or before Exchange included statements October 7, 2009. concerning the purpose of and basis for For the Commission, by the Division of the proposed rule change and discussed Trading and Markets, pursuant to delegated any comments it received on the authority.12 proposed rule change. The text of these statements may be examined at the Florence E. Harmon, places specified in Item IV below. The Deputy Secretary. Exchange has prepared summaries, set [FR Doc. E9–22246 Filed 9–15–09; 8:45 am] forth in sections A, B, and C below, of BILLING CODE 8010–01–P 1 15 12 17 CFR 200.30–3(a)(12). VerDate Nov<24>2008 17:40 Sep 15, 2009 2 17 Jkt 217001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00085 Fmt 4703 Sfmt 4703 1. Purpose The rule changes proposed herein are consistent with existing rules and practices that allow Phlx and other options exchanges to list and trade Mini-NDX (MNX) and other index options at $1 strike price intervals,3 and to trade index options at $2.50 strike price intervals.4 The purpose of the proposed rule change is to amend Phlx Rules 1012 and 1101A so that the Exchange may list eight index options at $1 strike price intervals below $200. The purpose is also to amend Rule 1101A so that the Exchange may list options on two indexes at $2.50 strike price intervals below $200. The indexes underlying options in respect of which the Exchange is proposing $1 strike price intervals in this filing, which are also known as sector indexes, are: PHLX Gold/Silver Index (option symbol XAU), PHLX Housing Index (option symbol HGX), PHLX Oil Service Index (option symbol OSX), SIG Oil Exploration & Production IndexTM (option symbol EPXSM),5 PHLX Semiconductor Index (option symbol SOX), KBW Bank Index (option symbol BKX),6 SIG Energy MLP IndexSM (option 3 Regarding $1 strike price intervals for MNX, see Securities Exchange Act Release Nos. 58924 (November 10, 2008), 73 FR 68464 (November 18, 2008) (SR–CBOE–2008–96) (approval order); 58997 (November 21, 2008), 73 FR 72887 (December 1, 2008) (SR–ISE–2008–88) (notice of filing and immediate effectiveness); 59129 (December 22, 2008), 73 FR 79945 (December 30, 2008) (SR–BSE– 2008–57) (notice of filing and immediate effectiveness); and 60156 (June 22. 2009), 74 FR 31077 (June 29, 2009) (SR–Phlx-2009–46) (notice of filing and immediate effectiveness). Regarding $1 and smaller strike price intervals for other index options, see Securities Exchange Act Release Nos. 39011 (September 3, 1997), 62 FR 47840 (September 11, 1997) (SR–CBOE–1997–26) (approval order regarding $0.50 strike price intervals for DJIA options); and 58207 (July 29, 2008), 73 FR 43963 (July 22, 2008) (SR–CBOE–2008–26) (approval order regarding $1 strike price intervals for BXM options). 4 Regarding $2.50 strike price intervals, see Securities Exchange Act Release Nos. 35993 (July 19, 1995), 60 FR 38073 (July 25, 1995) (approving File Nos. SR–Phlx-95–08, SR–Amex-95–12, SR– PSE–95–07, SR–CBOE–95–19, and SR–NYSE–95– 12 and approving the $2.50 pilot program); and 40662 (November 12, 1998), 63 FR 64297 (November 19, 1998) (approving File Nos. SR– Amex-98–21, SR–CBOE–98–29, SR–PCX–98–31, and SR–Phlx-98–26 and permanently approving the $2.50 pilot). 5 The SIG Indexes noted herein are trademarks of SIG Indices, LLLP. 6 The KBW Bank Index is also known as the PHLX/KBW Bank Index. See SR–Phlx-2009–58 (clarifying the name as KBW Bank Index). E:\FR\FM\16SEN1.SGM 16SEN1 Federal Register / Vol. 74, No. 178 / Wednesday, September 16, 2009 / Notices srobinson on DSKHWCL6B1PROD with NOTICES symbol SVOTM), and Reduced Value Russell 2000 ® Index (option symbol RMN) 7 (these eight indexes are together known as the ‘‘$1 Indexes’’ and individually as the ‘‘$1 Index’’). The indexes underlying options in respect of which the Exchange is proposing $2.50 strike price intervals are the NASDAQ China IndexSM (option symbol CNZ) and the Reduced Value Russell 2000® Index (option symbol RMN). Strike price intervals for options on indexes are established in Rule 1101A(a) at three levels: (a) At no less than $5 generally, (b) at no less than $2.50 for options on indexes that are specifically listed in the rule; and (c) at no less than $1 for Reduced Value Nasdaq 100® Options (MNX), which are based on 1/10th the value of the Nasdaq 100® Index (NDX).8 Thus, the $1 Indexes can be listed at $2.50 strike price intervals, as long as the strike price is below $200.9 The Exchange now proposes, in Commentary .03 to Rule 1101A, that the minimum strike price interval for $1 Indexes will be $1 or greater, as long as the strike price is below $200. 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. For initial series, the Exchange would list at least two strike prices above and two strike prices below the current value of the $1 Index at or about the 7 Reduced Value Russell 2000® Options are also known as mini-Russell options. Russell 2000® is a trademark and service mark of the Frank Russell Company, used under license. Neither Frank Russell Company’s publication of the Russell Indexes nor its licensing of its trademarks for use in connection with securities or other financial products derived from a Russell Index in any way suggests or implies a representation or opinion by Frank Russell Company as to the attractiveness of investment in any securities or other financial products based upon or derived from any Russell Index. Frank Russell Company is not the issuer of any such securities or other financial products and makes no express or implied warranties of merchantability or fitness for any particular purpose with respect to any Russell Index or any data included or reflected therein, nor as to results to be obtained by any person or any entity from the use of the Russell Index or any data included or reflected therein. 8 Rule 1101A(b)(v) also discusses, among other things, that the strike prices of options pursuant to the Quarterly Options Series Program (‘‘Quarterly Options Series’’) will be fixed at a price per share, with at least two, but not more than five, strike prices above and at least two, but not more than five, strike prices below the value of the underlying security at the time that a Quarterly Options Series is opened for trading on the Exchange. For strike price intervals for non-index options, see Rule 1012. 9 See subsections (v), (vi), (vii), (viii), (xxii), (xxiii), and proposed subsections (xxxii) and (xxxiv) of Rule 1101A(a). VerDate Nov<24>2008 17:40 Sep 15, 2009 Jkt 217001 time a series is opened for trading on the Exchange. As part of this initial listing, the Exchange would list strike prices that are within five (5) points from the closing value of the $1 Index on the preceding day. As for additional series, the Exchange would be permitted to add series 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. To the extent that any additional strike prices are listed by the Exchange, such additional strike prices shall be within thirty percent (30%) above or below the closing value of the $1 Index. The Exchange would also 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 would not be considered when determining customer interest. In addition to the initial listed series, the Exchange may list up to sixty (60) additional series per expiration month for each series in $1 Index options. In all cases, however, $1 strike price intervals may be listed on $1 Index options only where the strike price is less than $200.10 The Exchange confirms that it shall not list LEAPS on $1 Index options at intervals less than $2.50.11 The Exchange is also proposing to set forth a delisting policy with respect to $1 Index options. Specifically, 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. Notwithstanding the proposed delisting policy, customer requests to add strikes and/or maintain strikes in $1 Index options in series eligible for delisting may be granted. The Exchange also proposes to clarify Commentary .09 to Rule 1012 with an internal cross reference stating that the 10 And, as noted, if the strike price is $200 or above, the Exchange may list Index options at $2.50 or higher strike prices. Rule 1101A. 11 This is consistent with Rule 1101A(a). PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 47635 intervals between strike prices for options on the Reduced Value Russell 2000® Index would be determined in accordance with proposed new Commentary .03 to Rule 1101A.12 Phlx has analyzed its capacity and represents that it believes the Exchange and the Options Price Reporting Authority have the necessary systems capacity to handle the additional traffic associated with listing and trading $1 or greater strikes in $1 Index options. The Exchange has received numerous requests this year from traders of the $1 Index options for trading in $1 strike price increments. The Exchange believes that allowing the listing of these options at $1 increments as proposed, particularly in the current economic climate with downward pressure on pricing of the $1 Indexes discussed herein,13 should enable traders of such options and their customers to make more accurate and tailored trading and hedging decisions.14 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 15 in general, and furthers the objectives of Section 6(b)(5) of the Act 16 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 $1 Index options at $1 or greater strike price intervals. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose 12 The language of proposed Commentary .09 to Rule 1012 and proposed subsection (xxxvi) of Rule 1101A(a) in respect of Nasdaq 100® Options is conformed. 13 During the preceding year, each of the $1 Indexes have lost 50% or more in value, and four lost more than 65% in value. While there has been some recovery so that as of August 2009 the average overall value loss was around 23%, the significant losses continue, with two of the indexes continuing to show greater than 40% value losses. 14 More than a decade ago, the Commission approved $1 strike price intervals for options on different products that are sometimes used by traders and their customers in lieu of options on index funds, namely options on Exchange Traded Fund Shares (‘‘ETFs’’). See Securities Exchange Act Release Nos. 40157 (July 1, 1998), 63 FR 37426 (July 10, 1998) (SR–Amex–96–44) (approval order regarding $1 strike price intervals for ETFs); 44055 (March 8, 2001), 66 FR 15310 (March 16, 2001) (notice of filing and immediate effectiveness). See also Commentary .05 to Rule 1012. 15 15 U.S.C. 78f(b). 16 15 U.S.C. 78f(b)(5). E:\FR\FM\16SEN1.SGM 16SEN1 47636 Federal Register / Vol. 74, No. 178 / Wednesday, September 16, 2009 / Notices 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 Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will: (a) By order approve such proposed rule change, or (b) institute proceedings to determine whether the proposed rule change should be disapproved. 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 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–2009–77 and should be submitted on or before October 7, 2009. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–22243 Filed 9–15–09; 8:45 am] BILLING CODE 8010–01–P 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 Number SR–Phlx–2009–77 on the subject line. srobinson on DSKHWCL6B1PROD with NOTICES 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: AGENCY: Department of State. ACTION: Designation of North Korea’s DEPARTMENT OF STATE [Public Notice 6762] Additional Designation of Two Entities Pursuant to Executive Order 13382 General Bureau of Atomic Energy (GBAE) and Korea Tangun Trading Corporation (Tangun) Pursuant to Executive Order 13382. SUMMARY: Pursuant to the authority in section 1(ii) of Executive Order 13382, ‘‘Blocking Property of Weapons of Mass Paper Comments Destruction Proliferators and Their • Send paper comments in triplicate Supporters’’, the State Department, in to Elizabeth M. Murphy, Secretary, consultation with the Secretary of the Securities and Exchange Commission, Treasury and the Attorney General, has 100 F Street, NE., Washington, DC determined that two North Korean 20549–1090. entities, the General Bureau of Atomic All submissions should refer to File Energy (GBAE) and Korea Tangun Number SR–Phlx–2009–77. This file Trading Corporation, have engaged, or number should be included on the attempted to engage, in activities or subject line if e-mail is used. To help the transactions that have materially Commission process and review your contributed to, or pose a risk of comments more efficiently, please use materially contributing to, the only one method. The Commission will proliferation of weapons of mass post all comments on the Commission’s destruction or their means of delivery Internet Web site (https://www.sec.gov/ (including missiles capable of delivering rules/sro.shtml). Copies of the such weapons), including any efforts to submission, all subsequent manufacture, acquire, possess, develop, amendments, all written statements transport, transfer or use such items, by with respect to the proposed rule any person or foreign country of change that are filed with the proliferation concern. Commission, and all written DATES: The designation by the Under communications relating to the Secretary of State of the entities proposed rule change between the 17 17 CFR 200.30–3(a)(12). Commission and any person, other than VerDate Nov<24>2008 19:04 Sep 15, 2009 Jkt 217001 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 identified in this notice pursuant to Executive Order 13382 is effective on September 3, 2009. FOR FURTHER INFORMATION CONTACT: Director, Office of Counterproliferation Initiatives, Bureau of International Security and Nonproliferation, Department of State, Washington, DC 20520, tel.: 202–647–5193. Background: On June 28, 2005, the President, invoking the authority, inter alia, of the International Emergency Economic Powers Act (50 U.S.C. 1701–1706) (‘‘IEEPA’’), issued Executive Order 13382 (70 FR 38567, July 1, 2005) (the ‘‘Order’’), effective at 12:01 a.m. eastern daylight time on June 30, 2005. In the Order the President took additional steps with respect to the national emergency described and declared in Executive Order 12938 of November 14, 1994, regarding the proliferation of weapons of mass destruction and the means of delivering them. Section 1 of the Order blocks, with certain exceptions, all property and interests in property that are in the United States, or that hereafter come within the United States or that are or hereafter come within the possession or control of United States persons, of: (1) The persons listed in the Annex to the Order; (2) any foreign person determined by the Secretary of State, in consultation with the Secretary of the Treasury, the Attorney General, and other relevant agencies, to have engaged, or attempted to engage, in activities or transactions that have materially contributed to, or pose a risk of materially contributing to, the proliferation of weapons of mass destruction or their means of delivery (including missiles capable of delivering such weapons), including any efforts to manufacture, acquire, possess, develop, transport, transfer or use such items, by any person or foreign country of proliferation concern; (3) any person determined by the Secretary of the Treasury, in consultation with the Secretary of State, the Attorney General, and other relevant agencies, to have provided, or attempted to provide, financial, material, technological or other support for, or goods or services in support of, any activity or transaction described in clause (2) above or any person whose property and interests in property are blocked pursuant to the Order; and (4) any person determined by the Secretary of the Treasury, in consultation with the Secretary of State, the Attorney General, and other relevant agencies, to be owned or controlled by, E:\FR\FM\16SEN1.SGM 16SEN1

Agencies

[Federal Register Volume 74, Number 178 (Wednesday, September 16, 2009)]
[Notices]
[Pages 47634-47636]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-22243]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60637; File No. SR-Phlx-2009-77]


Self-Regulatory Organizations; Notice of Filing of 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

September 9, 2009.
    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 September 4, 2009, 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, II, and III 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.
---------------------------------------------------------------------------

    \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 proposes to amend Phlx Rules 1012 (Series of Options 
Open for Trading) and 1101A (Terms of Option Contracts) regarding 
listing certain options at $1 strike price intervals below $200. The 
proposal also amends Rule 1101A regarding listing certain options on 
indexes at $2.50 strike price intervals below $200.
    The text of the proposed rule change is available on the Exchange's 
Web site at https://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 rule changes proposed herein are consistent with existing rules 
and practices that allow Phlx and other options exchanges to list and 
trade Mini-NDX (MNX) and other index options at $1 strike price 
intervals,\3\ and to trade index options at $2.50 strike price 
intervals.\4\
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    \3\ Regarding $1 strike price intervals for MNX, see Securities 
Exchange Act Release Nos. 58924 (November 10, 2008), 73 FR 68464 
(November 18, 2008) (SR-CBOE-2008-96) (approval order); 58997 
(November 21, 2008), 73 FR 72887 (December 1, 2008) (SR-ISE-2008-88) 
(notice of filing and immediate effectiveness); 59129 (December 22, 
2008), 73 FR 79945 (December 30, 2008) (SR-BSE-2008-57) (notice of 
filing and immediate effectiveness); and 60156 (June 22. 2009), 74 
FR 31077 (June 29, 2009) (SR-Phlx-2009-46) (notice of filing and 
immediate effectiveness). Regarding $1 and smaller strike price 
intervals for other index options, see Securities Exchange Act 
Release Nos. 39011 (September 3, 1997), 62 FR 47840 (September 11, 
1997) (SR-CBOE-1997-26) (approval order regarding $0.50 strike price 
intervals for DJIA options); and 58207 (July 29, 2008), 73 FR 43963 
(July 22, 2008) (SR-CBOE-2008-26) (approval order regarding $1 
strike price intervals for BXM options).
    \4\ Regarding $2.50 strike price intervals, see Securities 
Exchange Act Release Nos. 35993 (July 19, 1995), 60 FR 38073 (July 
25, 1995) (approving File Nos. SR-Phlx-95-08, SR-Amex-95-12, SR-PSE-
95-07, SR-CBOE-95-19, and SR-NYSE-95-12 and approving the $2.50 
pilot program); and 40662 (November 12, 1998), 63 FR 64297 (November 
19, 1998) (approving File Nos. SR-Amex-98-21, SR-CBOE-98-29, SR-PCX-
98-31, and SR-Phlx-98-26 and permanently approving the $2.50 pilot).
---------------------------------------------------------------------------

    The purpose of the proposed rule change is to amend Phlx Rules 1012 
and 1101A so that the Exchange may list eight index options at $1 
strike price intervals below $200. The purpose is also to amend Rule 
1101A so that the Exchange may list options on two indexes at $2.50 
strike price intervals below $200.
    The indexes underlying options in respect of which the Exchange is 
proposing $1 strike price intervals in this filing, which are also 
known as sector indexes, are: PHLX Gold/Silver Index (option symbol 
XAU), PHLX Housing Index (option symbol HGX), PHLX Oil Service Index 
(option symbol OSX), SIG Oil Exploration & Production 
IndexTM (option symbol EPX\SM\),\5\ PHLX Semiconductor Index 
(option symbol SOX), KBW Bank Index (option symbol BKX),\6\ SIG Energy 
MLP Index\SM\ (option

[[Page 47635]]

symbol SVOTM), and Reduced Value Russell 2000 [supreg] Index 
(option symbol RMN) \7\ (these eight indexes are together known as the 
``$1 Indexes'' and individually as the ``$1 Index''). The indexes 
underlying options in respect of which the Exchange is proposing $2.50 
strike price intervals are the NASDAQ China Index\SM\ (option symbol 
CNZ) and the Reduced Value Russell 2000[supreg] Index (option symbol 
RMN).
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    \5\ The SIG Indexes noted herein are trademarks of SIG Indices, 
LLLP.
    \6\ The KBW Bank Index is also known as the PHLX/KBW Bank Index. 
See SR-Phlx-2009-58 (clarifying the name as KBW Bank Index).
    \7\ Reduced Value Russell 2000[supreg] Options are also known as 
mini-Russell options. Russell 2000[reg] is a trademark and service 
mark of the Frank Russell Company, used under license. Neither Frank 
Russell Company's publication of the Russell Indexes nor its 
licensing of its trademarks for use in connection with securities or 
other financial products derived from a Russell Index in any way 
suggests or implies a representation or opinion by Frank Russell 
Company as to the attractiveness of investment in any securities or 
other financial products based upon or derived from any Russell 
Index. Frank Russell Company is not the issuer of any such 
securities or other financial products and makes no express or 
implied warranties of merchantability or fitness for any particular 
purpose with respect to any Russell Index or any data included or 
reflected therein, nor as to results to be obtained by any person or 
any entity from the use of the Russell Index or any data included or 
reflected therein.
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    Strike price intervals for options on indexes are established in 
Rule 1101A(a) at three levels: (a) At no less than $5 generally, (b) at 
no less than $2.50 for options on indexes that are specifically listed 
in the rule; and (c) at no less than $1 for Reduced Value Nasdaq 
100[supreg] Options (MNX), which are based on 1/10th the value of the 
Nasdaq 100[supreg] Index (NDX).\8\ Thus, the $1 Indexes can be listed 
at $2.50 strike price intervals, as long as the strike price is below 
$200.\9\
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    \8\ Rule 1101A(b)(v) also discusses, among other things, that 
the strike prices of options pursuant to the Quarterly Options 
Series Program (``Quarterly Options Series'') will be fixed at a 
price per share, with at least two, but not more than five, strike 
prices above and at least two, but not more than five, strike prices 
below the value of the underlying security at the time that a 
Quarterly Options Series is opened for trading on the Exchange. For 
strike price intervals for non-index options, see Rule 1012.
    \9\ See subsections (v), (vi), (vii), (viii), (xxii), (xxiii), 
and proposed subsections (xxxii) and (xxxiv) of Rule 1101A(a).
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    The Exchange now proposes, in Commentary .03 to Rule 1101A, that 
the minimum strike price interval for $1 Indexes will be $1 or greater, 
as long as the strike price is below $200. 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.
    For initial series, the Exchange would 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. As part of this initial listing, the Exchange would list 
strike prices that are within five (5) points from the closing value of 
the $1 Index on the preceding day.
    As for additional series, the Exchange would be permitted to add 
series 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. To the extent 
that any additional strike prices are listed by the Exchange, such 
additional strike prices shall be within thirty percent (30%) above or 
below the closing value of the $1 Index. The Exchange would also 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 would not be considered when determining 
customer interest. In addition to the initial listed series, the 
Exchange may list up to sixty (60) additional series per expiration 
month for each series in $1 Index options. In all cases, however, $1 
strike price intervals may be listed on $1 Index options only where the 
strike price is less than $200.\10\
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    \10\ And, as noted, if the strike price is $200 or above, the 
Exchange may list Index options at $2.50 or higher strike prices. 
Rule 1101A.
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    The Exchange confirms that it shall not list LEAPS on $1 Index 
options at intervals less than $2.50.\11\
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    \11\ This is consistent with Rule 1101A(a).
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    The Exchange is also proposing to set forth a delisting policy with 
respect to $1 Index options. Specifically, 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.
    Notwithstanding the proposed delisting policy, customer requests to 
add strikes and/or maintain strikes in $1 Index options in series 
eligible for delisting may be granted.
    The Exchange also proposes to clarify Commentary .09 to Rule 1012 
with an internal cross reference stating that the intervals between 
strike prices for options on the Reduced Value Russell 2000[supreg] 
Index would be determined in accordance with proposed new Commentary 
.03 to Rule 1101A.\12\
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    \12\ The language of proposed Commentary .09 to Rule 1012 and 
proposed subsection (xxxvi) of Rule 1101A(a) in respect of Nasdaq 
100[supreg] Options is conformed.
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    Phlx has analyzed its capacity and represents that it believes the 
Exchange and the Options Price Reporting Authority have the necessary 
systems capacity to handle the additional traffic associated with 
listing and trading $1 or greater strikes in $1 Index options.
    The Exchange has received numerous requests this year from traders 
of the $1 Index options for trading in $1 strike price increments. The 
Exchange believes that allowing the listing of these options at $1 
increments as proposed, particularly in the current economic climate 
with downward pressure on pricing of the $1 Indexes discussed 
herein,\13\ should enable traders of such options and their customers 
to make more accurate and tailored trading and hedging decisions.\14\
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    \13\ During the preceding year, each of the $1 Indexes have lost 
50% or more in value, and four lost more than 65% in value. While 
there has been some recovery so that as of August 2009 the average 
overall value loss was around 23%, the significant losses continue, 
with two of the indexes continuing to show greater than 40% value 
losses.
    \14\ More than a decade ago, the Commission approved $1 strike 
price intervals for options on different products that are sometimes 
used by traders and their customers in lieu of options on index 
funds, namely options on Exchange Traded Fund Shares (``ETFs''). See 
Securities Exchange Act Release Nos. 40157 (July 1, 1998), 63 FR 
37426 (July 10, 1998) (SR-Amex-96-44) (approval order regarding $1 
strike price intervals for ETFs); 44055 (March 8, 2001), 66 FR 15310 
(March 16, 2001) (notice of filing and immediate effectiveness). See 
also Commentary .05 to Rule 1012.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \15\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \16\ 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 $1 Index options at $1 or 
greater strike price intervals.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 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

[[Page 47636]]

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will: (a) By order approve 
such proposed rule change, or (b) institute proceedings to determine 
whether the proposed rule change should be 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2009-77 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-2009-77. 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 (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 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 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-2009-77 and should be 
submitted on or before October 7, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-22243 Filed 9-15-09; 8:45 am]
BILLING CODE 8010-01-P
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