Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Regarding the Listing of Option Series with $1 Strike Prices, 6644-6646 [2011-2569]
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Federal Register / Vol. 76, No. 25 / Monday, February 7, 2011 / Notices
underlying moved to $19.75, the $13,
$10, $8, and $5 strikes could be added.
The Exchange also proposes that
additional long-term option strikes may
not be listed within $1 of an existing
strike until less than nine months to
expiration.
Finally, the Exchange represents that
it has the necessary systems capacity to
support the small increase in new
options series that will result from the
proposed changes to the $1 Strike
Program.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 5 in general, and furthers the
objectives of Section 6(b)(5) of the Act 6
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. In
particular, the proposed rule change
seeks to reduce investor confusion and
address issues that have arisen in the
operation of the $1 Strike Program by
providing a consistent application of
strike price intervals for issues in the $1
Strike Program.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
NASDAQ does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
emcdonald on DSK2BSOYB1PROD with NOTICES
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not significantly affect the
protection of investors or the public
interest, does not impose any significant
burden on competition, and, by its
terms, does not become operative for 30
days from the date on which it was
filed, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 7 and Rule 19b–
4(f)(6) thereunder.8
5 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
7 15 U.S.C. 78s(b)(3)(A).
8 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
6 15
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The Exchange has requested that the
Commission waive the 30-day operative
delay. The Commission believes that
waiver of the operative delay is
consistent with the protection of
investors and the public interest
because the proposal is substantially
similar to that of another exchange that
has been approved by the Commission.9
Therefore, the Commission designates
the proposal operative upon filing.10
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2011–018 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2011–018. 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
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Commission
has waived the five-day prefiling requirement in
this case.
9 See Securities Exchange Act Release No. 63773
(January 25, 2011) (SR–NYSEAmex–2010–109). See
also Securities Exchange Act Release No. 63770
(January 25, 2011) (SR–NYSEArca–2010–106).
10 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).
PO 00000
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submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. All comments received will
be posted without change; the
Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NASDAQ–2011–018 and should be
submitted on or before February 28,
2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–2568 Filed 2–4–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–63810; File No. SR–Phlx–
2011–14]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change by NASDAQ
OMX PHLX LLC Regarding the Listing
of Option Series with $1 Strike Prices
February 1, 2011.
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 January
31, 2011, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
11 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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Federal Register / Vol. 76, No. 25 / Monday, February 7, 2011 / Notices
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 is filing with the
Commission a proposal to modify
Commentary .05 to Phlx Rule 1012
(Series of Options Open for Trading) to
improve the operation of the $1 Strike
Price Program (the ‘‘$1 Strike Program’’
or ‘‘Program’’).3
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, 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
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
emcdonald on DSK2BSOYB1PROD with NOTICES
The purpose of this proposed rule
change is to improve the operation of
the $1 Strike Program.
Currently, the $1 Strike Program only
allows the listing of new $1 strikes
within $5 of the previous day’s closing
3 The $1 Strike Program was initially approved on
June 11, 2003 as pilot, and was then extended
several times until June 5, 2008. See Securities
Exchange Act Release Nos. 48013 (June 11, 2003),
68 FR 35933 (June 17, 2003) (SR–Phlx–2002–55)
(approval of pilot program); 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). The program was subsequently
expanded and made permanent in 2008. See
Securities Exchange Act Release No. 57111 (January
8, 2008), 73 FR 2297 (January 14, 2008) (SR–Phlx–
2008–01). The program was last expanded in 2010.
See Securities Exchange Act Release No. 62420
(June 30, 2010), 75 FR 39593 (July 9, 2010) (SR–
Phlx–2010–72). The $1 Strike Program is found in
Commentary .05 to Rule 1012.
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17:16 Feb 04, 2011
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price. In certain circumstances this has
led to situations where there are no atthe-money $1 strikes for a day, despite
significant demand. For instance, on
November 15, 2010, the underlying
shares of Isilon Systems Inc. opened at
$33.83. It had closed the previous
trading day at $26.29. Options were
available in $1 intervals up to $31, but
because of the restriction to only listing
within $5 of the previous close, the
following strikes were not permitted to
be added during the day: $32, $33, $34,
$36, $37 and $38.
The Exchange proposes that $1
interval strike prices be allowed to be
added immediately within $5 of the
official opening price in the primary
listing market. Thus, on any day, $1
Strike Program strikes may be added
within $5 of either the opening price or
the previous day’s closing price.
On occasion, the price movement in
the underlying security has been so
great that listing within $5 of either the
previous day’s closing price or the day’s
opening price will leave a gap in the
continuity of strike prices. For instance,
if an issue closes at $14 one day, and the
next day opens above $27, the $21 and
$22 strikes will be more than $5 from
either benchmark. The Exchange
proposes that any such discontinuity be
avoided by allowing the listing of all $1
Strike Program strikes between the
closing price and the opening price.
Additionally, issues that are in the $1
Strike Program may currently have
$2.50 interval strike prices added that
are more than $5 from the underlying
price or are more than nine months to
expiration (long-term options series). In
such cases, the listing of a $2.50 interval
strike may lead to discontinuities in
strike prices and also a lack of parallel
strikes in different expiration months of
the same issue. For instance, under the
current rules, the Exchange may list a
$12.50 strike in a $1 Strike Program
issue where the underlying price is $24.
This allowance was provided to avoid
too large of an interval between the
standard strike prices of $10 and $15.
The unintended consequence, however,
is that if the underlying price should
decline to $16, the Exchange would not
be able to list a $12 or $13 strike. If the
underlying stayed near this level at
expiration, a new expiration month
would have the $12 and $13 strike but
not the $12.50, leading to a disparity in
strike intervals in different months of
the same option class. This has also led
to investor confusion, as they regularly
request the addition of inappropriate
strikes so as to roll a position from one
month to another at the same strike
level.
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6645
To avoid this problem, the Exchange
may not list series with $2.50 intervals
(e.g., $12.50, $17.50) below $50 for any
issue included within the $1 Strike
Program, including long term option
series. At each standard $5 increment
strike more than $5 from the price of the
underlying security, the Exchange
proposes to list the strike $2 above the
standard strike for each interval above
the price of the underlying security, and
$2 below the standard strike, for each
interval below the price of the
underlying security, provided it meets
the Options Listing Procedures Plan
(‘‘OLPP’’) provisions in Commentary .10
to Rule 1012.4 For instance, if the
underlying security was trading at $19,
the Exchange could list, for each month,
the following strikes: $3, $5, $8, $10,
$13, $14, $15, $16, $17, $18, $19, $20,
$21, $22, $23, $24, $25, $27, $30, $32,
$35, and $37.
Instead of $2.50 strikes for long-term
options, the Exchange proposes to list
one long-term $1 Strike option series
strike in the interval between each
standard $5 strike, with the $1 Strike
being $2 above the standard strike price
for each interval above the price of the
underlying security, and $2 below the
standard strike price, for each interval
below the price of the underlying
security. In addition, the Exchange may
list the long-term $1 strike which is $2
above the standard strike just below the
underlying price at the time of listing,
and may add additional long term
options series strikes as the price of the
underlying security moves, consistent
with the OLPP. For instance, if the
underlying is trading at $21.25, longterm strikes could be listed at $15, $18,
$20, $22, $25, $27, and $30. If the
underlying subsequently moved to $22,
the $32 strike could be added. If the
underlying moved to $19.75, the $13,
$10, $8, and $5 strikes could be added.
The Exchange also proposes that
additional long-term option strikes may
not be listed within $1 of an existing
strike until less than nine months to
expiration.
Finally, the Exchange represents that
it has the necessary systems capacity to
support the small increase in new
options series that will result from the
proposed changes to the $1 Strike
Program.
4 Commentary .10 to Rule 1012 codifies the
limitation on strike price ranges outlined in the
OLPP, which, except in limited circumstances,
prohibits options series with an exercise price more
than 100% above or below the price of the
underlying security if that price is $20 or less. If the
price of the underlying security is greater than $20,
the Exchange shall not list new options series with
an exercise price more than 50% above or below the
price of the underlying security.
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6646
Federal Register / Vol. 76, No. 25 / Monday, February 7, 2011 / Notices
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 5 in general, and furthers the
objectives of Section 6(b)(5) of the Act 6
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. In
particular, the proposed rule change
seeks to reduce investor confusion and
address issues that have arisen in the
operation of the $1 Strike Program by
providing a consistent application of
strike price intervals for issues in the $1
Strike Program.
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 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
Because the foregoing proposed rule
change does not significantly affect the
protection of investors or the public
interest, does not impose any significant
burden on competition, and, by its
terms, does not become operative for 30
days from the date on which it was
filed, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 7 and Rule
19b–4(f)(6) thereunder.8
The Exchange has requested that the
Commission waive the 30-day operative
delay. The Commission believes that
waiver of the operative delay is
consistent with the protection of
investors and the public interest
because the proposal is substantially
5 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
7 15 U.S.C. 78s(b)(3)(A).
8 17 CFR 240.19b–4(f)(6). In addition, Rule
19b–4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Commission
has waived the five-day prefiling requirement in
this case.
emcdonald on DSK2BSOYB1PROD with NOTICES
6 15
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Jkt 223001
similar to that of another exchange that
has been approved by the Commission.9
Therefore, the Commission designates
the proposal operative upon filing.10
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–Phlx–2011–14 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–2011–14. 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 website viewing and
printing in the Commission’s Public
9 See Securities Exchange Act Release No. 63773
(January 25, 2011) (SR–NYSEAmex–2010–109). See
also Securities Exchange Act Release No.63770
(January 25, 2011) (SR–NYSEArca–2010–106).
10 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).
PO 00000
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Fmt 4703
Sfmt 4703
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–
2011–14 and should be submitted on or
before February 28, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Elizabeth M. Murpthy,
Secretary.
[FR Doc. 2011–2569 Filed 2–4–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–63815; File No. SR–
NASDAQ–2011–012]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Modify NASDAQ Options Market Rules
Chapter VII, Various Sections, Dealing
With Market Maker Obligations
February 1, 2011.
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 January
19, 2011, 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 by NASDAQ. 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
NASDAQ proposes to amend Chapter
VII, Section 3, Continuing Market Maker
Registration, Section 5, Obligations of
Market Makers, and Section 6, Market
Maker Quotations, of the NASDAQ
rulebook for the NASDAQ Options
Market (‘‘NOM’’) to: (a) Permit Market
Maker assignment by option rather than
by series; (b) adopt a $5 quotation
11 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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]]>Agencies
[Federal Register Volume 76, Number 25 (Monday, February 7, 2011)]
[Notices]
[Pages 6644-6646]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-2569]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63810; File No. SR-Phlx-2011-14]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Regarding
the Listing of Option Series with $1 Strike Prices
February 1, 2011.
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 January 31, 2011, NASDAQ OMX PHLX LLC (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
The Commission is publishing this notice to
[[Page 6645]]
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing with the Commission a proposal to modify
Commentary .05 to Phlx Rule 1012 (Series of Options Open for Trading)
to improve the operation of the $1 Strike Price Program (the ``$1
Strike Program'' or ``Program'').\3\
---------------------------------------------------------------------------
\3\ The $1 Strike Program was initially approved on June 11,
2003 as pilot, and was then extended several times until June 5,
2008. See Securities Exchange Act Release Nos. 48013 (June 11,
2003), 68 FR 35933 (June 17, 2003) (SR-Phlx-2002-55) (approval of
pilot program); 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). The program was subsequently expanded and
made permanent in 2008. See Securities Exchange Act Release No.
57111 (January 8, 2008), 73 FR 2297 (January 14, 2008) (SR-Phlx-
2008-01). The program was last expanded in 2010. See Securities
Exchange Act Release No. 62420 (June 30, 2010), 75 FR 39593 (July 9,
2010) (SR-Phlx-2010-72). The $1 Strike Program is found in
Commentary .05 to Rule 1012.
---------------------------------------------------------------------------
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, 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 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 this proposed rule change is to improve the
operation of the $1 Strike Program.
Currently, the $1 Strike Program only allows the listing of new $1
strikes within $5 of the previous day's closing price. In certain
circumstances this has led to situations where there are no at-the-
money $1 strikes for a day, despite significant demand. For instance,
on November 15, 2010, the underlying shares of Isilon Systems Inc.
opened at $33.83. It had closed the previous trading day at $26.29.
Options were available in $1 intervals up to $31, but because of the
restriction to only listing within $5 of the previous close, the
following strikes were not permitted to be added during the day: $32,
$33, $34, $36, $37 and $38.
The Exchange proposes that $1 interval strike prices be allowed to
be added immediately within $5 of the official opening price in the
primary listing market. Thus, on any day, $1 Strike Program strikes may
be added within $5 of either the opening price or the previous day's
closing price.
On occasion, the price movement in the underlying security has been
so great that listing within $5 of either the previous day's closing
price or the day's opening price will leave a gap in the continuity of
strike prices. For instance, if an issue closes at $14 one day, and the
next day opens above $27, the $21 and $22 strikes will be more than $5
from either benchmark. The Exchange proposes that any such
discontinuity be avoided by allowing the listing of all $1 Strike
Program strikes between the closing price and the opening price.
Additionally, issues that are in the $1 Strike Program may
currently have $2.50 interval strike prices added that are more than $5
from the underlying price or are more than nine months to expiration
(long-term options series). In such cases, the listing of a $2.50
interval strike may lead to discontinuities in strike prices and also a
lack of parallel strikes in different expiration months of the same
issue. For instance, under the current rules, the Exchange may list a
$12.50 strike in a $1 Strike Program issue where the underlying price
is $24. This allowance was provided to avoid too large of an interval
between the standard strike prices of $10 and $15. The unintended
consequence, however, is that if the underlying price should decline to
$16, the Exchange would not be able to list a $12 or $13 strike. If the
underlying stayed near this level at expiration, a new expiration month
would have the $12 and $13 strike but not the $12.50, leading to a
disparity in strike intervals in different months of the same option
class. This has also led to investor confusion, as they regularly
request the addition of inappropriate strikes so as to roll a position
from one month to another at the same strike level.
To avoid this problem, the Exchange may not list series with $2.50
intervals (e.g., $12.50, $17.50) below $50 for any issue included
within the $1 Strike Program, including long term option series. At
each standard $5 increment strike more than $5 from the price of the
underlying security, the Exchange proposes to list the strike $2 above
the standard strike for each interval above the price of the underlying
security, and $2 below the standard strike, for each interval below the
price of the underlying security, provided it meets the Options Listing
Procedures Plan (``OLPP'') provisions in Commentary .10 to Rule
1012.\4\ For instance, if the underlying security was trading at $19,
the Exchange could list, for each month, the following strikes: $3, $5,
$8, $10, $13, $14, $15, $16, $17, $18, $19, $20, $21, $22, $23, $24,
$25, $27, $30, $32, $35, and $37.
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\4\ Commentary .10 to Rule 1012 codifies the limitation on
strike price ranges outlined in the OLPP, which, except in limited
circumstances, prohibits options series with an exercise price more
than 100% above or below the price of the underlying security if
that price is $20 or less. If the price of the underlying security
is greater than $20, the Exchange shall not list new options series
with an exercise price more than 50% above or below the price of the
underlying security.
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Instead of $2.50 strikes for long-term options, the Exchange
proposes to list one long-term $1 Strike option series strike in the
interval between each standard $5 strike, with the $1 Strike being $2
above the standard strike price for each interval above the price of
the underlying security, and $2 below the standard strike price, for
each interval below the price of the underlying security. In addition,
the Exchange may list the long-term $1 strike which is $2 above the
standard strike just below the underlying price at the time of listing,
and may add additional long term options series strikes as the price of
the underlying security moves, consistent with the OLPP. For instance,
if the underlying is trading at $21.25, long-term strikes could be
listed at $15, $18, $20, $22, $25, $27, and $30. If the underlying
subsequently moved to $22, the $32 strike could be added. If the
underlying moved to $19.75, the $13, $10, $8, and $5 strikes could be
added.
The Exchange also proposes that additional long-term option strikes
may not be listed within $1 of an existing strike until less than nine
months to expiration.
Finally, the Exchange represents that it has the necessary systems
capacity to support the small increase in new options series that will
result from the proposed changes to the $1 Strike Program.
[[Page 6646]]
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \5\ in general, and furthers the objectives of Section
6(b)(5) of the Act \6\ 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.
In particular, the proposed rule change seeks to reduce investor
confusion and address issues that have arisen in the operation of the
$1 Strike Program by providing a consistent application of strike price
intervals for issues in the $1 Strike Program.
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\5\ 15 U.S.C. 78f(b).
\6\ 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 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
Because the foregoing proposed rule change does not significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \7\ and Rule 19b-
4(f)(6) thereunder.\8\
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Commission has waived the five-day prefiling requirement in this
case.
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The Exchange has requested that the Commission waive the 30-day
operative delay. The Commission believes that waiver of the operative
delay is consistent with the protection of investors and the public
interest because the proposal is substantially similar to that of
another exchange that has been approved by the Commission.\9\
Therefore, the Commission designates the proposal operative upon
filing.\10\
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\9\ See Securities Exchange Act Release No. 63773 (January 25,
2011) (SR-NYSEAmex-2010-109). See also Securities Exchange Act
Release No.63770 (January 25, 2011) (SR-NYSEArca-2010-106).
\10\ 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 summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-Phlx-2011-14 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-2011-14. 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 website viewing and
printing in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal 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-2011-14 and should be
submitted on or before February 28, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murpthy,
Secretary.
[FR Doc. 2011-2569 Filed 2-4-11; 8:45 am]
BILLING CODE 8011-01-P
