Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Order Granting Approval of Proposed Rule Change To Expand Its $1 Strike Program to 150 Classes, 39593-39595 [2010-16682]
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wwoods2 on DSK1DXX6B1PROD with NOTICES_PART 1
Federal Register / Vol. 75, No. 131 / Friday, July 9, 2010 / Notices
on equitable grounds. The Applicants
contend that the Credit provisions are
generally beneficial to the Contract
Owner. The recapture provisions of the
Current Contracts temper this benefit
somewhat, but unless the Contract
Owner dies, the Contract Owner retains
the ability to avoid the Credit recapture
in the circumstances described in the
application. The Applicants state that
the Credit recapture provisions are
necessary for NWL to offer the Credits
and avoid anti-selection against it. No
CDSC would be imposed in any of the
circumstances under which a Credit
would be recaptured.
10. The Applicants submit that it
would be inequitable to NWL to permit
a Contract Owner to keep his or her
Credits upon his or her exercise of the
Current Contract’s free look provision.
Because no CDSC applies to the exercise
of the free look right, the Contract
Owner could obtain a quick profit in the
amount of the Credit at NWL’s expense
by exercising that right immediately
after the Credits were applied to the
Current Contract.
11. Likewise, the Applicants submit
that it would be inequitable to permit a
Contract Owner or beneficiary to keep
Credits in those situations where the
annuitant dies within 12 months of
applying a Credit, where Credits are
applied after the Contract Owner’s
death, or where the Contract Owner
takes a surrender or withdrawal from
the Current Contract without a CDSC
under the terms of the Long-Term Care/
Nursing Home and Terminal Illness
Waiver within 12 months of applying a
Credit. In these situations, NWL would
be unable to recover the cost of granting
the Credits because they would be
redeemed out of the Current Contract
before enough time passed for NWL to
recoup a sufficient portion of the
associated costs through the assessment
of charges, particularly the daily
Mortality and Expense Risk Charge and
the daily Administrative Charge. The
Applicants state that NWL cannot offer
the proposed Credits without the ability
to recapture those Credits in the
circumstances described herein.
12. The Applicants state, based on the
grounds presented below, that their
exemptive request meets the standards
set out in section 6(c) of the act, namely,
that the exemptions requested are
necessary or appropriate in the public
interest and consistent with the
protection of investors and the purposes
fairly intended by the policy and
provisions of the act and that, therefore,
the Commission should grant the
requested order.
13. The Applicants submit that their
request for an Order that is applicable
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15:17 Jul 08, 2010
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to the Contracts and Other Accounts, as
well as Other Underwriters, is
appropriate in the public interest. The
Applicants also contend that such Order
would promote competitiveness in the
variable annuity market by eliminating
the need to file redundant exemptive
applications, thereby reducing
administrative expenses and
maximizing the efficient use of the
Applicants’ resources. The Applicants
further assert that investors would not
receive any benefit or additional
protection by requiring the Applicants
to repeatedly seek exemptive relief that
would present no issue under the act
that has not already been addressed in
the Amended Application described
herein. The Applicants submit that
filing additional applications would
impair their ability to effectively take
advantage of business opportunities as
they arise. Furthermore, the Applicants
state that if they were repeatedly
required to seek exemptive relief with
respect to the same issues addressed in
the Amended Application described
herein, investors would not receive any
benefit or additional protection thereby.
Conclusion
Applicants submit that based on the
analysis presented above, the provisions
for recapture of the Credit under the
Contracts does not violate sections
2(a)(32) and 27(i)(2)(A) of the act and
rule 22c–1 thereunder. Applicants
further submit that there are equitable
grounds for granting the requested relief
and the exemptions requested meet the
standards of section 6(c) of the act and
respectfully request that the
Commission issue an order of approval
pursuant to section 6(c) of the act to
exempt the Applicants with respect to:
(1) The Contracts; (2) the Separate
Account and Other Accounts that
support the Contracts; and (3) NISC and
Other Underwriters, from the provisions
of sections 2(a)(32) and 27(i)(2)(A) of the
act and rule 22c–1 thereunder, to the
extent necessary to permit the recapture
of all or a portion of the Credits in the
circumstances described above.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010–16754 Filed 7–8–10; 8:45 am]
BILLING CODE 8010–01–P
PO 00000
39593
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold an Open Meeting
on July 14, 2010 at 10 a.m., in the
Auditorium, Room L–002.
The Commission will consider
whether to issue a concept release to
solicit public comment as to whether
the Commission should consider
revisions to its rules to promote greater
efficiency and transparency in the U.S.
proxy system and enhance the accuracy
and integrity of the shareholder vote.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact:
The Office of the Secretary at (202)
551–5400.
Dated: July 7, 2010.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010–16888 Filed 7–7–10; 4:15 pm]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62420; File No. SR–Phlx–
2010–72]
Self-Regulatory Organizations;
NASDAQ OMX PHLX, Inc.; Order
Granting Approval of Proposed Rule
Change To Expand Its $1 Strike
Program to 150 Classes
June 30, 2010.
I. Introduction
On May 7, 2010, NASDAQ OMX
PHLX, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and rule
19b–4 thereunder,2 a proposed rule
change to expand the Exchange’s $1
Strike Price Program 3 (the ‘‘$1 Strike
Program’’ or ‘‘Program’’) to allow the
Exchange to select 150 individual stocks
on which options may be listed at $1
strike price intervals. The proposed rule
change was published for comment in
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Phlx Rule 1012, Commentary .05(a)(i).
2 17
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Federal Register / Vol. 75, No. 131 / Friday, July 9, 2010 / Notices
the Federal Register on May 28, 2010.4
The Commission received no comment
letters on the proposal. This order
approves the proposed rule change.
II. Description of the Proposals
The $1 Strike Program was
established as a pilot program on June
11, 2003.5 The Program was
subsequently made permanent in 2008,6
and was last expanded in 2009.7 The $1
Strike Program currently allows the
Exchange to select a total of 55
individual stocks on which option
series may be listed at $1 strike price
intervals. To be eligible for inclusion in
the Program, an underlying stock must
close below $50 in its primary market
on the previous trading day. For each
stock selected for the Program, the
Exchange may list strike prices at $1
intervals from $1 to $50, but no $1 strike
price may be listed that is greater than
$5 from the underlying stock’s closing
price in its primary market on the
previous day. The Exchange also may
list $1 strikes on any other option class
designated by another securities
exchange that employs a similar
program under that exchange’s rules.
The Exchange may not list long-term
option series with $1 strike price
intervals for any class selected for the
program, except as specifically
permitted by Exchange rules.8 The
Exchange is restricted from listing any
series that would result in strike prices
being $0.50 apart, except that series
with strike prices of $2, $3, and $4 are
permitted within $0.50 of an existing
series for classes also selected to
participate in the $0.50 strike program.9
The Program includes a delisting
policy that requires the Exchange, on a
monthly basis, to review series that
wwoods2 on DSK1DXX6B1PROD with NOTICES_PART 1
4 Securities
Exchange Act Release No. 62151 (May
21, 2010), 75 FR 30078 (‘‘Notice’’).
5 See Securities Exchange Act Release No. 48013
(June 11, 2003), 68 FR 35933 (June 17, 2003) (SR–
Phlx–2002–55) (approval of pilot program). The
Strike Program was then extended several times
until June 5, 2008. See Securities Exchange Act
Release Nos. 49801 (June 3, 2004), 69 FR 32652
(June 10, 2004) (SR–Phlx–2004–38); 51768 (May 31,
2005), 70 FR 33250 (June 7, 2005) (SR–Phlx–2005–
35); 53938 (June 5, 2006), 71 FR 34178 (June 13,
2006) (SR–Phlx–2006–36); and 55666 (April 25,
2007), 72 FR 23879 (May 1, 2007) (SR–Phlx–2007–
29).
6 See Securities Exchange Act Release No. 57111
(January 8, 2008), 73 FR 2297 (January 14, 2008)
(SR–Phlx–2008–01).
7 See Securities Exchange Act Release No. 59590
(March 17, 2009), 74 FR 12412 (March 24, 2009)
(SR–Phlx–2009–21).
8 See Securities Exchange Act Release No. 61277
(January 4, 2010), 75 FR 1442 (January 11, 2009)
(SR–Phlx–2009–108) (notice of filing and
immediate effectiveness of a rule change permitting
the Exchange to list up to 200 option classes on
individual stocks with $1 strike prices up to $5 in
LEAPS®).
9 See Phlx Rule 1012, Commentary .05(a)(ii).
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were originally listed under the Program
with strike prices that are more than $5
from the current underlying values of
the options classes in the Program. The
Exchange shall delist series with no
open interest in both the put and the
call series having either: (i) A strike
higher than the highest strike price with
open interest in the put and/or call
series for a given expiration month; or
(ii) a strike lower than the lowest strike
price with open interest in the put and/
or call series for a given expiration
month.10
The Exchange has proposed to amend
its rules to expand the $1 Strike
Program to allow each Exchange to
select a total of 150 individual stocks on
which option series may be listed at $1
strike price intervals. The existing
restrictions on listing series with $1
strikes, as outlined above, will continue.
The provision that each Exchange may
also list series with $1 strikes on any
other option class designated by another
securities exchange that employs a
similar program under that exchange’s
rules will remain unchanged.
The Exchange represented that it and
the Options Price Reporting Authority
have the necessary systems capacity to
handle the additional traffic associated
with the listing and trading of an
expanded number of options series as
proposed by this filing. In addition, the
Exchange noted that, since the inception
of the Program in 2003, the Exchange
has not had any substantive problems,
related to capacity or otherwise,
attributed to the Program or the listing
and trading of options at $1 strike
intervals.
III. Discussion
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange.11 In particular, the
Commission finds that the proposal is
consistent with section 6(b)(5) of the
Act 12 in that it is designed to promote
just and equitable principles of trade, to
prevent fraudulent and manipulative
acts, and, in general, to protect investors
and the public interest.
Currently, the maximum number of
classes on which $1 strike intervals may
10 Notwithstanding the delisting policy, the
Exchange may grant member requests to add strikes
and/or maintain strikes in series of options classes
traded pursuant to the Program that are eligible for
delisting.
11 In approving these proposed rule changes, the
Commission notes that it has considered the
proposed rules’ impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
12 15 U.S.C. 78f(b)(5).
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be listed is 440 (8 × 55), as there are
eight exchanges that offer a $1 strike
program. Phlx has represented in its
filing that market conditions have led to
an increase in the number of securities
trading below $50, and that there are
currently more than 2,000 options
classes for which the underlying stock
trades below $50. The Exchange reports
that it has, therefore, received repeated
requests from its members to expand the
$1 Strike Program to a greater number
of classes. However, the Exchange is
constrained from doing so because it has
listed $1 strike options on the maximum
number of 55 classes under its current
rule.
The Commission believes that, as the
price of an underlying stock declines,
narrower strike price intervals on
options overlying the stock may be
appropriate. In this case, the
Commission believes that the proposal
to have $1 strike price intervals in a
limited number of active options series
priced between $1 and $50 is consistent
with the Act. The expanded $1 Strike
Program appears reasonably designed to
allow investors to establish equity
options positions that are better tailored
to meet their investment objectives,
particularly given current market
conditions. The Commission also
believes that continued adherence to the
delisting policy should ensure the
Exchange’s expanded $1 Strike Program
maintains a reasonable balance between
the Exchange’s desire to accommodate
market participants by offering a wider
array of products and the need to avoid
unnecessary proliferation of options
series and the corresponding increase in
quotes or a significant dispersal of
liquidity across multiple series.
In approving the proposed rule
change, the Commission has relied on
the Exchange’s representation that it has
the necessary systems capacity to
support the new options series that will
be listed under this proposal. Further,
the Commission expects that the
Exchange will continue to 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.
IV. Conclusion
It is therefore ordered, pursuant to
section 19(b)(2) of the Act,13 that the
proposed rule changes (SR–Phlx–2010–
72) be, and they hereby are, approved.
13 15
E:\FR\FM\09JYN1.SGM
U.S.C. 78s(b)(2).
09JYN1
Federal Register / Vol. 75, No. 131 / Friday, July 9, 2010 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010–16682 Filed 7–8–10; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34-62377; File No. SRNYSEArca-2010-55]
Self-Regulatory Organizations; Notice
of Filing of Proposed Rule Change by
NYSE Arca, Inc. To Amend the Bylaws
of NYSE Euronext To Adopt a Majority
Voting Standard in Uncontested
Elections of Directors
Correction
In notice document 2010–16106
beginning on page 38576 in the issue of
July 2, 2010, make the following
correction:
On page 38579, in the final line of the
first paragraph, ‘‘June 23, 2010’’ should
read ‘‘July 23, 2010’’.
[FR Doc. C1–2010–16106 Filed 7–8–10; 8:45 am]
BILLING CODE 1505–01–D
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62444; File No. SR–ISE–
2010–72]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change by the
International Securities Exchange, LLC
To Expand and Permanently Establish
Its Short Term Option Series Program
wwoods2 on DSK1DXX6B1PROD with NOTICES_PART 1
July 2, 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 July 1,
2010, the International Securities
Exchange, LLC (the ‘‘Exchange’’ or the
‘‘ISE’’) filed with the Securities and
Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange has
filed the proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of
the Act 3 and Rule 19b–4(f)(6)
thereunder.4 The Commission is
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
1 15
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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 its
rules to regarding the Short Term
Option Series Program. The text of the
proposed rule change is available on the
Exchange’s Web site https://
www.ise.com, at the principal office of
the Exchange, on the Commission’s Web
site at https://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 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
self-regulatory organization 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
On July 12, 2005, the Commission
approved the Short Term Option Series
Program (the ‘‘Program’’) on a pilot basis
that allows ISE to list and trade Short
Term Option Series.5 The Program was
subsequently extended 6 and the current
Program is set to expire on July 12,
2010.7 The Commission has also
approved permanent establishment of
the Program in 2009 on behalf of the
Chicago Board Options Exchange
(‘‘CBOE’’).8 Thereafter, CBOE amended
its rules to permit opening Short Term
Options Series not just on Friday but
also on Thursday.9
The Purpose of this proposed rule
change is to amend ISE rules to (1) make
the Program permanent, (2) increase to
5 See Securities Exchange Act Release No. 52012
(July 12, 2005), 70 FR 41246 (July 18, 2005).
6 See Securities Exchange Act Release Nos. 54117
(July 12, 2006), 71 FR 40564 (July 17, 2006); 56047
(July 11, 2007), 72 FR 39106 (July 17, 2007); and
58020 (June 25, 2008), 73 FR 38000 (July 2, 2008).
7 See Securities Exchange Act Release No. 60281
(July 10, 2009), 74 FR 34811 (July 17, 2009).
8 See Securities Exchange Act Release No. 59824
(April 27, 2009), 74 FR 20518 (May 4, 2009).
9 See Securities Exchange Act Release No. 62170
(May 25, 2010), 75 FR 30889 (June 2, 2010).
PO 00000
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39595
twenty the number of series the
Exchange may open for each expiration
date in a class, and (3) permit the
Exchange to open a Short Term Options
Series for trading on any Thursday or
Friday. The Exchange’s proposal is
based on the short term options program
currently in place at the CBOE.10 The
Exchange also proposes to make nonsubstantive changes to reorganize the
rule text related to the Program so that
applicable terms are located within a
single section. These non-substantive
changes do not change the substance of
the Program.
Under the terms of the Program
currently in place, after an option class
has been approved for listing and
trading on the Exchange, ISE may open
for trading on any Friday that is a
business day (‘‘Short Term Option
Opening Date’’) series of options on that
class that expire on the next Friday that
is a business day (‘‘Short Term Option
Expiration Date’’). If the Exchange is not
open for business on a Friday, the Short
Term Option Opening Date is the first
business day immediately prior to that
Friday. Similarly, if the Exchange is not
open for business on a Friday, the Short
Term Option Expiration Date is the first
business day immediately prior to that
Friday. Further, the Exchange can select
up to five options classes on which
Short Term Option Series may be
opened on any Short Term Option
Series Opening Date. The Exchange is
also allowed to list Short Term Option
Series on any option class that is
selected by other securities exchanges
that employ a similar program under
their respective rules. Further, for each
option class eligible for participation in
the Program, the Exchange may open up
to five Short Term Option Series for
each expiration date in that class. The
strike price of each Short Term Option
Series is fixed at a price per share, with
at least two strike prices above and two
strike prices below the value of the
underlying security at about the time
that Short Term Option Series is opened
for trading on the Exchange.
As noted above, pursuant to
Commission approval, CBOE has made
its short term options program
permanent. On the basis of the CBOE’s
approval, the Exchange proposes to also
make permanent its short term options
series program.
Additionally, the Exchange also
proposes to amend its rules such that
after an options class has been approved
for listing and trading on the Exchange,
the Exchange may open for trading on
any Thursday or Friday that is a
business day series of options on that
10 See
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CBOE Rules 5.5 and 24.9.
09JYN1
]]>Agencies
[Federal Register Volume 75, Number 131 (Friday, July 9, 2010)]
[Notices]
[Pages 39593-39595]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-16682]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62420; File No. SR-Phlx-2010-72]
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Order
Granting Approval of Proposed Rule Change To Expand Its $1 Strike
Program to 150 Classes
June 30, 2010.
I. Introduction
On May 7, 2010, NASDAQ OMX PHLX, Inc. (``Phlx'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and rule 19b-4 thereunder,\2\ a proposed rule change to
expand the Exchange's $1 Strike Price Program \3\ (the ``$1 Strike
Program'' or ``Program'') to allow the Exchange to select 150
individual stocks on which options may be listed at $1 strike price
intervals. The proposed rule change was published for comment in
[[Page 39594]]
the Federal Register on May 28, 2010.\4\ The Commission received no
comment letters on the proposal. This order approves the proposed rule
change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Phlx Rule 1012, Commentary .05(a)(i).
\4\ Securities Exchange Act Release No. 62151 (May 21, 2010), 75
FR 30078 (``Notice'').
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II. Description of the Proposals
The $1 Strike Program was established as a pilot program on June
11, 2003.\5\ The Program was subsequently made permanent in 2008,\6\
and was last expanded in 2009.\7\ The $1 Strike Program currently
allows the Exchange to select a total of 55 individual stocks on which
option series may be listed at $1 strike price intervals. To be
eligible for inclusion in the Program, an underlying stock must close
below $50 in its primary market on the previous trading day. For each
stock selected for the Program, the Exchange may list strike prices at
$1 intervals from $1 to $50, but no $1 strike price may be listed that
is greater than $5 from the underlying stock's closing price in its
primary market on the previous day. The Exchange also may list $1
strikes on any other option class designated by another securities
exchange that employs a similar program under that exchange's rules.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 48013 (June 11,
2003), 68 FR 35933 (June 17, 2003) (SR-Phlx-2002-55) (approval of
pilot program). The Strike Program was then extended several times
until June 5, 2008. See Securities Exchange Act Release Nos. 49801
(June 3, 2004), 69 FR 32652 (June 10, 2004) (SR-Phlx-2004-38); 51768
(May 31, 2005), 70 FR 33250 (June 7, 2005) (SR-Phlx-2005-35); 53938
(June 5, 2006), 71 FR 34178 (June 13, 2006) (SR-Phlx-2006-36); and
55666 (April 25, 2007), 72 FR 23879 (May 1, 2007) (SR-Phlx-2007-29).
\6\ See Securities Exchange Act Release No. 57111 (January 8,
2008), 73 FR 2297 (January 14, 2008) (SR-Phlx-2008-01).
\7\ See Securities Exchange Act Release No. 59590 (March 17,
2009), 74 FR 12412 (March 24, 2009) (SR-Phlx-2009-21).
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The Exchange may not list long-term option series with $1 strike
price intervals for any class selected for the program, except as
specifically permitted by Exchange rules.\8\ The Exchange is restricted
from listing any series that would result in strike prices being $0.50
apart, except that series with strike prices of $2, $3, and $4 are
permitted within $0.50 of an existing series for classes also selected
to participate in the $0.50 strike program.\9\
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\8\ See Securities Exchange Act Release No. 61277 (January 4,
2010), 75 FR 1442 (January 11, 2009) (SR-Phlx-2009-108) (notice of
filing and immediate effectiveness of a rule change permitting the
Exchange to list up to 200 option classes on individual stocks with
$1 strike prices up to $5 in LEAPS[supreg]).
\9\ See Phlx Rule 1012, Commentary .05(a)(ii).
---------------------------------------------------------------------------
The Program includes a delisting policy that requires the Exchange,
on a monthly basis, to review series that were originally listed under
the Program with strike prices that are more than $5 from the current
underlying values of the options classes in the Program. The Exchange
shall delist series with no open interest in both the put and the call
series having either: (i) A strike higher than the highest strike price
with open interest in the put and/or call series for a given expiration
month; or (ii) a strike lower than the lowest strike price with open
interest in the put and/or call series for a given expiration
month.\10\
---------------------------------------------------------------------------
\10\ Notwithstanding the delisting policy, the Exchange may
grant member requests to add strikes and/or maintain strikes in
series of options classes traded pursuant to the Program that are
eligible for delisting.
---------------------------------------------------------------------------
The Exchange has proposed to amend its rules to expand the $1
Strike Program to allow each Exchange to select a total of 150
individual stocks on which option series may be listed at $1 strike
price intervals. The existing restrictions on listing series with $1
strikes, as outlined above, will continue. The provision that each
Exchange may also list series with $1 strikes on any other option class
designated by another securities exchange that employs a similar
program under that exchange's rules will remain unchanged.
The Exchange represented that it and the Options Price Reporting
Authority have the necessary systems capacity to handle the additional
traffic associated with the listing and trading of an expanded number
of options series as proposed by this filing. In addition, the Exchange
noted that, since the inception of the Program in 2003, the Exchange
has not had any substantive problems, related to capacity or otherwise,
attributed to the Program or the listing and trading of options at $1
strike intervals.
III. Discussion
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\11\ In particular, the Commission finds that the proposal is
consistent with section 6(b)(5) of the Act \12\ in that it is designed
to promote just and equitable principles of trade, to prevent
fraudulent and manipulative acts, and, in general, to protect investors
and the public interest.
---------------------------------------------------------------------------
\11\ In approving these proposed rule changes, the Commission
notes that it has considered the proposed rules' impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\12\ 15 U.S.C. 78f(b)(5).
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Currently, the maximum number of classes on which $1 strike
intervals may be listed is 440 (8 x 55), as there are eight exchanges
that offer a $1 strike program. Phlx has represented in its filing that
market conditions have led to an increase in the number of securities
trading below $50, and that there are currently more than 2,000 options
classes for which the underlying stock trades below $50. The Exchange
reports that it has, therefore, received repeated requests from its
members to expand the $1 Strike Program to a greater number of classes.
However, the Exchange is constrained from doing so because it has
listed $1 strike options on the maximum number of 55 classes under its
current rule.
The Commission believes that, as the price of an underlying stock
declines, narrower strike price intervals on options overlying the
stock may be appropriate. In this case, the Commission believes that
the proposal to have $1 strike price intervals in a limited number of
active options series priced between $1 and $50 is consistent with the
Act. The expanded $1 Strike Program appears reasonably designed to
allow investors to establish equity options positions that are better
tailored to meet their investment objectives, particularly given
current market conditions. The Commission also believes that continued
adherence to the delisting policy should ensure the Exchange's expanded
$1 Strike Program maintains a reasonable balance between the Exchange's
desire to accommodate market participants by offering a wider array of
products and the need to avoid unnecessary proliferation of options
series and the corresponding increase in quotes or a significant
dispersal of liquidity across multiple series.
In approving the proposed rule change, the Commission has relied on
the Exchange's representation that it has the necessary systems
capacity to support the new options series that will be listed under
this proposal. Further, the Commission expects that the Exchange will
continue to 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.
IV. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\13\ that the proposed rule changes (SR-Phlx-2010-72) be, and they
hereby are, approved.
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\13\ 15 U.S.C. 78s(b)(2).
[[Page 39595]]
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Elizabeth M. Murphy,
Secretary.
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\14\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2010-16682 Filed 7-8-10; 8:45 am]
BILLING CODE 8010-01-P
