Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Relating to Listing and Trading Various Russell Products, 39457-39463 [2011-16843]

Download as PDF Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / 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–NYSEAmex–2011–44 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. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64770; File No. SR–Phlx– 2011–87] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Relating to Listing and Trading Various Russell Products June 29, 2011. sroberts on DSK5SPTVN1PROD with NOTICES 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 June 22, 2011, NASDAQ OMX PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the All submissions should refer to File Securities and Exchange Commission Number SR–NYSEAmex–2011–44. This (‘‘SEC’’ or ‘‘Commission’’) the proposed file number should be included on the rule change as described in Items I, II, subject line if e-mail is used. To help the and III, below, which Items have been Commission process and review your prepared by the Exchange. The comments more efficiently, please use Commission is publishing this notice to only one method. The Commission will solicit comments on the proposed rule post all comments on the Commission’s change from interested persons. Internet Web site (https://www.sec.gov/ I. Self-Regulatory Organization’s rules/sro.shtml). Copies of the Statement of the Terms of the Substance submission, all subsequent of the Proposed Rule Change amendments, all written statements The Exchange, pursuant to Section with respect to the proposed rule 19(b)(1) of the Act 3 and Rule 19b–4 change that are filed with the thereunder,4 proposes to amend Commission, and all written Exchange Rules 1079, 1001A and 1101A communications relating to the to list and trade new options on various proposed rule change between the Russell 5 Indexes based upon the (i) full Commission and any person, other than values of the Russell U.S. Indexes (‘‘Full those that may be withheld from the Value Russell U.S. Indexes’’) and (ii) public in accordance with the one-tenth values of the Russell U.S. provisions of 5 U.S.C. 552, will be Indexes (‘‘Reduced Values Russell U.S. available for Web site viewing and Indexes’’).6 The text of the proposed printing in the Commission’s Public rule change is available on the Reference Room on official business Exchange’s Web site at https:// days between the hours of 10 a.m. and www.nasdaqtrader.com/ 3 p.m. Copies of such filing also will be micro.aspx?id=PHLXRulefilings, at the available for inspection and copying at principal office of the Exchange, and at the principal offices of the Exchange. the Commission’s Public Reference All comments received will be posted Room. without change; the Commission does II. Self-Regulatory Organization’s not edit personal identifying Statement of the Purpose of, and information from submissions. You Statutory Basis for, the Proposed Rule should submit only information that Change you wish to make available publicly. All In its filing with the Commission, the submissions should refer to File Exchange included statements Number SR–NYSEAmex–2011–44, and concerning the purpose of and basis for should be submitted on or before July the proposed rule change and discussed 27, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Cathy H. Ahn, Deputy Secretary. [FR Doc. 2011–16888 Filed 7–5–11; 8:45 am] BILLING CODE 8011–01–P 17 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 18:17 Jul 05, 2011 Jkt 223001 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(1). 4 17 CFR 240.19b–4. 5 Russell refers to the Frank Russell Company. Information about the Russell U.S. Indexes can also be found at https://www.russell.com/us/indexes/us/ definitions.asp. 6 The Exchange currently lists cash-settled, European-style FULL Value Russell Options and Reduced Value Russell Options, including FLEX options and LEAPS, on the Russell 2000® Index and the Mini-Russell 2000. PO 00000 1 15 2 17 Frm 00082 Fmt 4703 Sfmt 4703 39457 any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to amend its Exchange Rules 1079 (FLEX Index, Equity and Currency Options), 1001A (Position Limits), and 1101A (Terms of Options Contracts) to list and trade cash-settled, Europeanstyle options, including FLEX 7 options and LEAPS,8 on the following products (collectively ‘‘Russell U.S. Indexes’’): Russell 3000® Index,9 Russell 3000® Value Index,10 Russell 3000® Growth Index,11 Russell 2500TM Index,12 Russell 2500TM Value Index,13 Russell 2500TM Growth Index,14 Russell 2000® Value Index,15 Russell 2000® Growth 7 FLEX Options are flexible exchange-traded index, equity, or currency option contracts that provide investors the ability to customize basic option features including size, expiration date, exercise style, and certain exercise prices. FLEX Options may have expiration dates within five years. See Exchange Rules 1079 and 1012. 8 LEAPS or Long Term Equity Anticipation Securities are long term options that generally expire from twelve to thirty-nine months from the time they are listed. 9 The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market. 10 The Russell 3000 Value Index measures the performance of the broad value segment of the U.S. equity universe. It includes those Russell 3000 companies with lower price-to-book ratios and lower forecasted growth values. 11 The Russell 3000 Growth Index measures the performance of the broad growth segment of the U.S. equity universe. It includes those Russell 3000 companies with higher price-to-book ratios and higher forecasted growth values. 12 The Russell 2500 Index measures the performance of the small to mid-cap segment of the U.S. equity universe, commonly referred to as ‘‘smid’’ cap. The Russell 2500 Index is a subset of the Russell 3000® Index. 13 The Russell 2500 Value Index measures the performance of the small to mid-cap value segment of the U.S. equity universe. It includes those Russell 2500 companies with lower price-to-book ratios and lower forecasted growth values. 14 The Russell 2500 Growth Index measures the performance of the small to mid-cap growth segment of the U.S. equity universe. It includes those Russell 2500 companies with higher price-tobook ratios and higher forecasted growth values. 15 The Russell 2000 Value Index measures the performance of small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. E:\FR\FM\06JYN1.SGM 06JYN1 39458 Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Notices sroberts on DSK5SPTVN1PROD with NOTICES Index,16 Russell 1000® Index,17 Russell 1000® Value Index,18 Russell 1000® Growth Index,19 Russell Top 200® Index,20 Russell Top 200® Value Index,21 Russell Top 200® Growth Index,22 Russell MidCap® Index,23 Russell MidCap® Value Index,24 Russell MidCap® Growth Index,25 Russell Small Cap Completeness® Index,26 Russell Small Cap Completeness® Value 16 The Russell 2000 Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values. 17 The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1,000 of the largest securities based on a combination of their market cap and current index membership. The Russell 1000 represents approximately 92% of the Russell 3000 Index. 18 The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values. 19 The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. 20 The Russell Top 200 Index measures the performance of the largest cap segment of the U.S. equity universe. The Russell Top 200 Index is a subset of the Russell 3000® Index. It includes approximately 200 of the largest securities based on a combination of their market cap and current index membership and represents approximately 65% of the U.S. market. 21 The Russell Top 200 Value Index measures the performance of the especially large cap segment of the U.S. equity universe represented by stocks in the largest 200 by market cap that exhibit value characteristics. It includes Russell Top 200 companies with lower price-to-book ratios and lower forecasted growth values. These stocks also are members of the Russell 1000® Value Index. 22 The Russell Top 200 Growth Index offers measures the performance of the especially large cap segment of the U.S. equity universe represented by stocks in the largest 200 by market cap that exhibit growth characteristics. It includes Russell Top 200 Index companies with higher price-to-book ratios and higher forecast growth values. The companies also are members of the Russell 1000® Growth Index. 23 The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe. The Russell Midcap Index is a subset of the Russell 1000® Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap Index represents approximately 27% of the total market capitalization of the Russell 1000 companies. 24 The Russell Midcap Value Index measures the performance of the mid-cap value segment of the U.S. equity universe. It includes those Russell Midcap Index companies with lower price-to-book ratios and lower forecasted growth values. 25 The Russell Midcap Growth Index measures the performance of the mid-cap growth segment of the U.S. equity universe. It includes those Russell Midcap Index companies with higher price-to-book ratios and higher forecasted growth values. 26 The Russell Small Cap Completeness measures the performance of the Russell 3000® Index companies excluding S&P 500 constituents. VerDate Mar<15>2010 18:17 Jul 05, 2011 Jkt 223001 Index 27 and Russell Small Cap Completeness® Growth Index.28 The Exchange also proposes to list and trade long-term options on each of the Full Value Russell U.S. Indexes and Reduced Value Russell U.S. Indexes noted above (‘‘Russell LEAPS’’).29 Index Design and Composition The Russell U.S. Indexes are designed to be a comprehensive representation of the investable U.S. equity market. These indexes are capitalization-weighted and include only common stocks belonging to corporations domiciled in the United States. These indexes are traded on NYSE, NYSE Amex and/or NASDAQ. Stocks are weighted by their ‘‘available’’ market capitalization, which is calculated by multiplying the primary market price by the ‘‘available’’ shares; that is, total shares outstanding less corporate cross-owned shares; shares owned by Employee Stock Ownership Plans (‘‘ESOPs’’) and Leveraged Employee Stock Ownership Plans (‘‘LESOPs’’) that comprise 10% or more of shares outstanding; shares that are part of unlisted share classes; and shares held by an individual, a group of individuals acting together, or a corporation not in the index that owns 10% or more of the shares outstanding; and shares subject to Initial Public Offering lock-ups. All equity securities listed on NYSE, NYSE Amex or NASDAQ are considered 27 The Russell Small Cap Completeness Value Index measures the performance of the Russell 3000® Index companies excluding S&P 500 constituents. It includes those Russell Small Cap Completeness Index companies with lower price-tobook ratios and lower forecasted growth values. 28 The Russell Small Cap Completeness Growth Index measures the performance of the Russell 3000® Index companies excluding S&P 500 constituents. It includes those Russell Small Cap Completeness Index companies with higher priceto-book ratios and higher forecast growth values. 29 Each of these Russell U.S. Indexes is a capitalization-weighted index containing various groups of stocks drawn from the largest 3,000 companies incorporated in the United States. All index components are traded on the New York Stock Exchange (‘‘NYSE’’), the NYSE Amex, Inc. (‘‘NYSE Amex’’) and/or the NASDAQ Stock Market LLC (‘‘NASDAQ’’). Options on all of the indexes, currently trade on the International Securities Exchange, LLC (‘‘ISE’’) and options on all of the indexes, except for the Russell 2500 Index (regular, value, and growth) and the Russell Small Cap Completeness Index (regular, value, and growth), currently trade on the Chicago Board Options Exchange (‘‘CBOE’’). The Russell 2000® Index is traded on Phlx and the Boston Options Exchange (‘‘BOX’’). All of the Russell U.S. Indexes are subsets of the Russell 3000 Index. The growth and value versions of each primary index (Russell 3000, Russell 2500, Russell 2000, Russell 1000, Russell Top 200, Russell Midcap, and Russell Small Cap Completeness) may contain common components, but the capitalization of those components is apportioned so that the sum of the total capitalization of the growth and value indexes equals the total capitalization of the respective primary index. PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 for inclusion in the Russell U.S. Indexes, with the following exceptions: (1) Stocks trading less than $1.00 per share on average during the month of May; (2) stocks of non-U.S. companies; (3) preferred and convertible preferred stocks; (4) redeemable shares; (5) participating preferred stocks; (6) warrants and rights; (7) trust receipts; (8) royalty trusts; (9) limited liability companies; (10) Bulletin Board and Pink Sheet stocks; (11) closed-end investment companies; (12) limited partnerships; and (13) foreign stocks. All of these stocks are ‘‘reported securities’’ as defined by Rule 11Aa3–1(a)(4) under the Act.30 [sic] As of May 31, 2010, the stocks comprising the Russell 1000® Index had an average market capitalization of $12.24 billion, ranging from a high of $295.03 billion (Exxon Mobil Corp.) to a low of $0.14 billion (Seahawk Drilling Inc.). The number of available shares outstanding averaged 401.41 million, ranging from a high of 28.98 billion (Citigroup Inc.) to a low of 6.17 million (NVR Inc.). The Russell 1000® Index has a total capitalization of approximately $11.7 trillion as of May 31, 2010. As of May 31, 2010, the stocks comprising the Russell 1000® Growth Index had an average market capitalization of $13.20 billion, ranging from a high of $295.03 billion (Exxon Mobil Corp.) to a low of $0.14 billion (Seahawk Drilling Inc.). The number of available shares outstanding averaged 355.18 million, ranging from a high of 8.76 billion (Microsoft Corp.) to a low of 6.17 million (NVR Inc.). The Russell 1000® Growth Index has a total capitalization of approximately $8.2 trillion as of May 31, 2010. As of May 31, 2010, the stocks comprising the Russell 1000® Value Index had an average market capitalization of $11.31 billion, ranging from a high of $295.03 billion (Exxon Mobil Corp.) to a low of $0.14 billion (Seahawk Drilling Inc.). The number of available shares outstanding averaged 429.04 million, ranging from a high of 28.98 billion (Citigroup Inc.) to a low of 6.17 million (NVR Inc.). The Russell 1000® Value Index has a total capitalization of approximately $7.6 trillion as of May 31, 2010. As of May 31, 2010, the stocks comprising the Russell 2000® Growth Index had an average market capitalization of $623.07 million, ranging from a high of $4.53 billion (Human Genome Sciences Inc.) to a low of $14.57 million (Repros Therapeutics Inc.). The number of available shares outstanding averaged 44.06 million, 30 17 E:\FR\FM\06JYN1.SGM CFR 240.11Aa3–1(a)(4). [sic] 06JYN1 sroberts on DSK5SPTVN1PROD with NOTICES Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Notices ranging from a high of 658.72 million (Cell Therapeutics) to a low of 2.02 million (Atrion Corp.). The Russell 2000® Growth Index has a total capitalization of approximately $0.8 trillion as of May 31, 2010. As of May 31, 2010, the stocks comprising the Russell 2000® Value Index had an average market capitalization of $579.57 million, ranging from a high of $3.34 billion (UAL Corp.) to a low of $26.15 million (Cardiac Science Corp.). The number of available shares outstanding averaged 46.19 million, ranging from a high of 2.20 billion (E*Trade Financial Corp.) to a low of 1.23 million (Seaboard Corp.). The Russell 2000® Value Index has a total capitalization of approximately $0.8 trillion as of May 31, 2010. As of May 31, 2010, the stocks comprising the Russell 3000® Index had an average market capitalization of $4.39 billion, ranging from a high of $295.03 billion (Exxon Mobil Corp.) to a low of $14.57 million (Repros Therapeutics Inc.). The number of available shares outstanding averaged 161.73 million, ranging from a high of 28.98 billion (Citigroup Inc.) to a low of 1.23 million (Seaboard Corp.). The Russell 3000® Index has a total capitalization of approximately $12.9 trillion as of May 31, 2010. As of May 31, 2010, the stocks comprising the Russell 3000® Growth Index had an average market capitalization of $4.77 billion, ranging from a high of $295.03 billion (Exxon Mobil Corp.) to a low of $14.57 million (Repros Therapeutics Inc.). The number of available shares outstanding averaged 146.50 million ranging from a high of 8.76 billion (Microsoft Corp.) to a low of 2.02 million (Atrion Corp.). The Russell 3000® Growth Index has a total capitalization of approximately $9.0 trillion as of May 31, 2010. As of May 31, 2010, the stocks comprising the Russell 3000® Value Index had an average market capitalization of $4.10 billion, ranging from a high of $295.03 billion (Exxon Mobil Corp.) to a low of $26.15 million (Cardiac Science Corp.). The number of available shares outstanding averaged 171.82 million, ranging from a high of 28.98 billion (Citigroup Inc.) to a low of 1.23 million (Seaboard Corp.). The Russell 3000® Value Index has a total capitalization of approximately $8.4 trillion as of May 31, 2010. As of May 31, 2010, the stocks comprising the Russell Midcap® Index had an average market capitalization of $4.59 billion, ranging from a high of $18.79 billion (TJX Cos Inc.) to a low of $0.14 billion (Seahawk Drilling Inc.). The number of available shares VerDate Mar<15>2010 18:17 Jul 05, 2011 Jkt 223001 outstanding averaged 173.74 million, ranging from a high of 1.74 billion (Qwest Communications International) to a low of 6.17 million (NVR Inc.). The Russell Midcap® Index has a total capitalization of approximately $3.5 trillion as of May 31, 2010. As of May 31, 2010, the stocks comprising the Russell Midcap® Growth Index had an average market capitalization of $4.71 billion, ranging from a high of $18.79 billion (TJX Cos Inc.) to a low of $0.14 billion (Seahawk Drilling Inc.). The number of available shares outstanding averaged 163.59 million, ranging from a high of 1.38 billion (Xerox Corp.) to a low of 6.17 million (NVR Inc.). The Russell Midcap® Growth Index has a total capitalization of approximately $2.3 trillion as of May 31, 2010. As of May 31, 2010, the stocks comprising the Russell Midcap® Value Index had an average market capitalization of 4.43 billion, ranging from a high of $15.48 billion (Las Vegas Sands Corp.) to a low of $0.14 billion (Seahawk Drilling Inc.). The number of available shares outstanding averaged 187.15 million, ranging from a high of 1.74 billion (Qwest Communications International) to a low of 6.17 million (NVR Inc.). The Russell Midcap® Value Index has a total capitalization of approximately $2.4 trillion as of May 31, 2010. As of May 31, 2010, the stocks comprising the Russell Top 200® Index had an average market capitalization of $42.92 billion, ranging from a high of $295.03 billion (Exxon Mobil Corp.) to a low of $2.24 billion (AOL Inc.). The number of available shares outstanding averaged 1.31 billion, ranging from a high of 28.98 billion (Citigroup Inc.) to a low of 48.90 million (Liberty Media Corp.—Starz). The Russell Top 200® Index has a total capitalization of approximately $8.2 trillion as of May 31, 2010. As of May 31, 2010, the stocks comprising the Russell Top 200® Growth Index had an average market capitalization of $44.74 billion, ranging from a high of $295.03 billion (Exxon Mobil Corp.) to a low of $9.11 billion (Boston Scientific Corp.) The number of available shares outstanding averaged 1.07 billion, ranging from a high of 8.76 billion (Microsoft Corp.) to a low of 64.32 million (Blackrock Inc.). The Russell Top 200® Growth Index has a total capitalization of approximately $5.9 trillion as of May 31, 2010. As of May 31, 2010, the stocks comprising the Russell Top 200® Value Index had an average market capitalization of $41.52 billion, ranging from a high of $295.03 billion (Exxon PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 39459 Mobil Corp.) to a low of $2.24 billion (AOL Inc.). The number of available shares outstanding averaged 1.49 billion, ranging from a high of 28.98 billion (Citigroup Inc.) to a low of 48.90 million (Liberty Media Corp.—Starz). The Russell Top 200® Value Index has a total capitalization of approximately $5.2 trillion as of May 31, 2010. As of May 31, 2010, the stocks comprising the Russell 2500 TM Index had an average market capitalization of $1.06 billion, ranging from a high of $10.19 billion (Centurylink Inc.) to a low of $14.57 million (Repros Therapeutics Inc.). The number of available shares outstanding averaged 62.53 million, ranging from a high of 2.20 billion (E*Trade Financial Corp.) to a low of 1.23 million (Seaboard Corp.). The Russell 2500 TM Index has a total capitalization of approximately $2.6 trillion as of May 31, 2010. As of May 31, 2010, the stocks comprising the Russell 2500 TM Growth Index had an average market capitalization of $1.07 billion, ranging from a high of $7.62 billion (Genworth Financial Inc.) to a low of $14.57 million (Repros Therapeutics Inc.). The number of available shares outstanding averaged 57.71 million, ranging from a high of 673.37 million (Advanced Micro Devices Inc.) to a low of 2.02 million (Atrion Corp.). The Russell 2500 TM Growth Index has a total capitalization of approximately $1.7 trillion as of May 31, 2010. As of May 31, 2010, the stocks comprising the Russell 2500TM Value Index had an average market capitalization of $1.05 billion, ranging from a high of $10.19 billion (Centurylink Inc.) to a low of $26.15 million (Cardiac Science Corp.). The number of available shares outstanding averaged 65.34 million, ranging from a high of 2.20 billion (E*Trade Financial Corp.) to a low of 1.23 million (Seaboard Corp.). The Russell 2500 TM Value Index has a total capitalization of approximately $1.8 trillion as of May 31, 2010. As of May 31, 2010, the stocks comprising the Russell Small Cap Completeness Index had an average market capitalization of $1.11 billion, ranging from a high of $31.67 billion (Blackrock Inc.) to a low of $14.57 million (Repros Therapeutics Inc.). The number of available shares outstanding averaged 61.07 million, ranging from a high of 1.66 billion (Level 3 Communications Inc.) to a low of 1.23 million (Seaboard Corp.). The Russell Small Cap Completeness Index has a total capitalization of approximately $2.7 trillion as of May 31, 2010. E:\FR\FM\06JYN1.SGM 06JYN1 39460 Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Notices As of May 31, 2010, the stocks comprising the Russell Small Cap Completeness Growth Index had an average market capitalization of $1.17 billion, ranging from a high of $31.67 billion (Blackrock Inc.) to a low of $14.57 million (Repros Therapeutics Inc.). The number of available shares outstanding averaged 59.29 million, ranging from a high of 1.24 billion (Activision Blizzard Inc.) to a low of 2.02 million (Atrion Corp.). The Russell Small Cap Completeness Growth Index has a total capitalization of approximately $1.8 trillion as of May 31, 2010. As of May 31, 2010, the stocks comprising the Russell Small Cap Completeness Value Index had an average market capitalization of $1.08 billion, ranging from a high $31.67 billion (Blackrock Inc.) to a low of $26.15 million (Cardiac Science Corp.). The number of available shares outstanding averaged 62.61 million, ranging from a high of 1.66 billion (Level 3 Communications Inc.) to a low of 1.23 million (Seaboard Corp.). The Russell Small Cap Completeness Value Index has a total capitalization of approximately $1.8 trillion as of May 31, 2010. Index Calculation and Index Maintenance The value of each Russell Index is currently calculated by Reuters Limited (‘‘Reuters’’) 31 on behalf of Russell and is disseminated every 15 seconds during regular Exchange trading hours to market information vendors via RussellTick TM.32 The methodology used to calculate the value of the Russell U.S. Indexes is similar to the methodology used to calculate the value of other well known market-capitalization-weighted indexes. The level of each index reflects the total market value of the component stocks relative to a particular base period and is computed by dividing the total market value of the companies in each index by the respective index divisor. The divisor is adjusted periodically to maintain consistent measurement of the index. Below is a table of base dates and the respective index levels as of May 26, 2011: Index sroberts on DSK5SPTVN1PROD with NOTICES Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Russell Total value ® 3000 ......................................................................................................................................................... 3000 ® Growth ............................................................................................................................................ 3000 ® Value ............................................................................................................................................... 1000 ® ......................................................................................................................................................... 1000 ® Growth ............................................................................................................................................ 1000 ® Value ............................................................................................................................................... Top 200 ® .................................................................................................................................................... Top 200 ® Growth ....................................................................................................................................... Top 200 ® Value ......................................................................................................................................... Midcap ® ...................................................................................................................................................... Midcap ® Growth ......................................................................................................................................... Midcap ® Value ........................................................................................................................................... 2000 ® ......................................................................................................................................................... 2000 ® Growth ............................................................................................................................................ 2000 ® Value ............................................................................................................................................... 2500 TM ....................................................................................................................................................... 2500 TM Growth .......................................................................................................................................... 2500 TM Value ............................................................................................................................................. Small Cap Completeness ® ........................................................................................................................ Small Cap Completeness ® Growth ........................................................................................................... Small Cap Completeness ® Value .............................................................................................................. 3000E ® Index ............................................................................................................................................. 3000E ® Growth Index ................................................................................................................................ 3000E ® Value Index .................................................................................................................................. Microcap ® Index ......................................................................................................................................... Microcap ® Growth Index ............................................................................................................................ Microcap ® Value Index .............................................................................................................................. 3000 ® Dynamic Index TM ........................................................................................................................... 3000 ® Defensive Index TM ......................................................................................................................... 1000 ® Dynamic Index TM ........................................................................................................................... 1000 ® Defensive Index TM ......................................................................................................................... 2000 ® Dynamic Index TM ........................................................................................................................... 2000 ® Defensive Index TM ......................................................................................................................... In recent years, the value of the Russell U.S. Indexes has increased significantly. As a result, the premium for options on the Full Russell U.S. Indexes has also increased, causing these index options to trade at a level that may be uncomfortably high for retail investors. Therefore, the Exchange also proposes to trade Reduced Value Russell U.S. 31 Reuters is a ThomsonReuters company. developed by NASDAQ OMX Information, LLC, is a premier data feed that consolidates the distribution of the Russell Family 32 RussellTick TM, VerDate Mar<15>2010 18:17 Jul 05, 2011 Jkt 223001 3587.75086 2879.89383 3817.44497 3602.4988 529.47313 725.61762 2939.54016 910.11636 1071.03283 6401.81184 1341.84209 1793.62334 3726.27315 3201.14137 5864.70724 1061.26992 3547.792 5493.08424 2229.12739 1726.03596 2732.41535 1298.3572 1297.56505 1066.61795 1196.56615 1119.15656 953.92585 1059.29034 1073.79788 1059.42851 1073.99375 1057.89868 1071.77749 Price value 1457.85247 2426.1502 2589.28728 1418.35062 403.83622 416.2859 546.63736 672.12634 651.91595 2797.43808 1065.26732 1125.65007 2064.91582 2903.97679 3980.15914 772.74832 3254.40744 3839.81694 1905.30123 1624.91776 2105.81535 1156.55132 1211.74568 938.33245 1116.96383 1093.12822 870.2775 1054.09067 1063.74849 1053.97672 1063.61825 1055.42339 1065.42301 Indexes. The Exchange believes that listing reduced value options would attract a greater source of customer business than if it listed only full value options on the Full Value Russell U.S. Indexes. The Exchange further believes that listing reduced value options would provide an opportunity for investors to hedge, or speculate on, the market risk associated with the stocks comprising the Russell U.S. Indexes and use this trading vehicle while extending a smaller outlay of capital. The Exchange believes that this should attract additional investors and, in turn, create a more active and liquid trading environment.33 of Indexes. NASDAQ OMX is the primary distribution source for all real-time Russell U.S. Indexes. 33 The Exchange believes that reduced value options on Russell U.S. Indexes have generated considerable interest from investors, as measured, by their robust trading volume on CBOE and ISE. PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 E:\FR\FM\06JYN1.SGM 06JYN1 sroberts on DSK5SPTVN1PROD with NOTICES Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Notices Options on the Russell U.S. Indexes would expire on the Saturday following the third Friday of the expiration month (‘‘Expiration Saturday’’). Trading in options on the Russell U.S. Indexes would normally cease at 4:15 p.m. Eastern Standard Time (‘‘EST’’) 34 on the Thursday preceding an Expiration Saturday. The exercise settlement value at expiration of each new index option would be calculated by Reuters on behalf of Russell, based on the opening prices of the index’s component securities on the last business day prior to expiration (‘‘Settlement Day’’).35 The Settlement Day is normally the Friday preceding Expiration Saturday. If a component security in a Russell Index does not trade on Settlement Day, the last reported sales price in the primary market from the previous trading day would be used to calculate both full and reduced settlement values. Settlement values for the Full and Reduced Value Russell U.S. Indexes would be disseminated via RussellTickTM. The Russell U.S. Indexes are monitored and maintained by Russell, which is responsible for making all necessary adjustments to the index to reflect component deletions, share changes, stock splits, stock dividends (other than ordinary cash dividends), and stock price adjustments due to restructuring, mergers, or spin-offs involving the underlying components. Some corporate actions, such as stock splits and stock dividends, require simple changes to the available shares outstanding and the stock prices of the underlying components. Other corporate actions, such as share issuances, change the market value of an index and require the use of an index divisor to effect adjustments. The Russell U.S. Indexes are reconstituted annually on the last Friday in June (unless the last Friday is the 27th or later of the month, in which case the re-constitution occurs on the prior Friday), based on prices and available shares outstanding as of the preceding May 31. New index components are added only as part of the annual reconstitution, after which, should a stock be removed from an index for any reason, it could not be replaced until the next re-constitution except in the case of a spin-off where the new company resulting from the spin-off meets the membership criteria of one of the existing indexes. The Exchange represents that it would monitor the Russell U.S. Indexes on a 34 See Exchange Rule 1001A. [sic] aggregate exercise value of the option contract is calculated by multiplying the index value by the index multiplier, which is 100. 35 The VerDate Mar<15>2010 18:17 Jul 05, 2011 Jkt 223001 quarterly basis, and would not list any additional series for trading and would limit all transactions in such options to closing transactions only for the purpose of maintaining a fair and orderly market and protecting investors if: (i) The number of securities in the Index drops by one-third or more; (ii) 10% or more of the weight of the Index is represented by component securities having a market value of less than $75 million; (iii) less than 80% of the weight of the Index is represented by component securities that are eligible for options trading pursuant to Exchange Rules 1000A et seq.; (iv) 10% or more of the weight of the Index is represented by component securities trading less than 20,000 shares per day; or (v) the largest component security accounts for more than 25% of the weight of the Index or the largest five components in the aggregate account for more than 50% of the weight of the Index. The Exchange represents that, if the Index ceases to be maintained or calculated, or if the Index values are not disseminated every 15 seconds by a widely available source, it would not list any additional series for trading and would limit all transactions in such options to closing transactions only for the purpose of maintaining a fair and orderly market and protecting investors. Contract Specifications The proposed contract specifications for the options on the Russell U.S. Indexes are based on the contract specifications of similar options currently listed on CBOE, NYSE Amex and ISE.36 The Russell U.S. Indexes are broad-based indexes, as defined in Exchange Rule 1101A(a). Options on the Russell U.S. Indexes would be European-style and a.m. cash-settled. The Exchange’s standard trading hours for index options (9:30 a.m. to 4:15 p.m. E.S.T.), as set forth in Exchange Rule 1101A at Commentary .01, would apply to options on the Russell U.S. Indexes. Exchange Rules that apply to the trading of options on broad-based indexes also would apply to options on both the Full and Reduced Value Russell Indexes.37 The trading of these options also would be subject to, among others, Exchange Rules governing margin requirements 38 note 27. generally Exchange Rules 1001A through 1107A (Rules Applicable to Trading Options on Indices) and Exchange Rules 1000 through 1094 (Rules Applicable to Trading of Options on Stocks, Exchange-Traded Fund Shares and Foreign Currencies). 38 See Exchange Rule 721 (Proper and Adequate Margin). PO 00000 36 See 37 See Frm 00086 Fmt 4703 Sfmt 4703 39461 and trading halt procedures 39 for index options. For options on the Full Value Russell U.S. Indexes, the Exchange proposes to establish an aggregate position limit of 50,000 contracts on the same side of the market, provided that no more than 30,000 of such contracts are in the nearest expiration month series. Full Value Russell Index contracts would be aggregated with Reduced Value Russell Index contracts, where ten Reduced Value Russell Index contracts would equal one Full Value Russell Index contract.40 These limits are identical to the limits applicable to options based on the Russell U.S. Indexes that currently trade on ISE.41 Additionally, Commentary .01 to Exchange Rule 1001A provides that under certain circumstances index options positions may be exempted from established position limits for each contract ‘‘hedged’’ by an equivalent dollar amount of the underlying component securities. Furthermore, Commentary .02 to that same Rule provides that member organizations may receive exemptions of up to two times the applicable position limit where the index options positions are in proprietary accounts used for the purpose of facilitating orders for customers of those member organizations.42 The Exchange proposes to apply existing index margin requirements for the purchase and sale of options on the Russell U.S. Indexes.43 Exchange Rule 1003 describes a member or member organizations obligations to file with the Exchange a report of that member or member organization’s positions.44 The Exchange proposes to set strike price intervals for these index options at $2.50 when the strike price of Full or Reduced Value Options Russell U.S. Indexes is below $200, and at least $5.00 strike price intervals otherwise.45 The minimum tick size for series trading below $3 would be $0.05 and for series trading at or above $3 would be $0.10.46 Exchange Rule 1101A provides that after a particular class of stock index options has been approved for listing 39 See Exchange Rule 1047A (Trading Rotations, Halts or Reopenings). 40 See Exchange Rule 1001A(e). The same limits that apply to position limits would apply to exercise limits for these products. See Exchange Rule 1002A. 41 See ISE Rule 2004. 42 See Exchange Rule 1001A (Position Limits). 43 See Exchange Rule 721 (Proper and Adequate Margin). 44 See Exchange Rule 1003 (Reporting of Options Positions). 45 See proposed Exchange Rule 1101A. 46 See Exchange Rule 1034 (Minimum Increments) and proposed 1101A (Position Limits). E:\FR\FM\06JYN1.SGM 06JYN1 sroberts on DSK5SPTVN1PROD with NOTICES 39462 Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Notices and trading on the Exchange, the Exchange shall from time to time open for trading series of options therein. Within each approved class of stock index options, the Exchange may open for trading series of options expiring in consecutive calendar months (‘‘consecutive month series’’), series of options expiring at three-month intervals (‘‘cycle month series’’), and/or series of options having up to thirty-six months to expiration (‘‘long-term options series’’). Prior to the opening of trading in any series of stock index options, the Exchange shall fix the expiration month and exercise price of option contracts included in each such series.47 The Exchange therefore, proposes to list options on the Full and Reduced Value Russell U.S. Indexes in the three consecutive near-term expiration months, plus up to three successive expiration months in the March cycle. For example, consecutive expirations of June, July and August, plus September, December and March expirations would be listed.48 The trading of long-term options on the Russell U.S. Indexes would be subject to the same rules that govern all the Exchange’s index options, including sales practice rules, margin requirements, and trading rules. All of the specifications and calculations for options on the Reduced Value Russell U.S. Indexes would be the same as those used for the Full Value Russell U.S. Indexes with position limits adjusted accordingly for the Reduced Value Russell Options. The reduced-value options would trade independently of, and in addition to, the full-value options. Options on all the Russell U.S. Indexes would be subject to the same rules that presently govern all Exchange index options, including sales practice rules, margin requirements, trading rules, and position and exercise limits. Exchange Rules are designed to protect public customer trading. Specifically, Rule 1024 prohibits members and member organizations from accepting a customer order to purchase or write an option unless such customer’s account has been approved in writing by a designated Options Principal of the Member.49 Additionally, Exchange Rule 1026, regarding suitability, is designed to ensure that options are only sold to customers capable of evaluating and bearing the risks associated with trading 47 See Exchange Rule 1101A(b) as it currently exists. 48 See Exchange Rule 1101A. 49 See Exchange Rule 1024 (Conduct of Accounts for Options Trading). VerDate Mar<15>2010 18:17 Jul 05, 2011 Jkt 223001 in this instrument.50 Further, Exchange Rule 1027 permits members and employees of member organizations to exercise discretionary power with respect to trading options in a customer’s account only if the member or employee of a member organization has received prior written authorization from the customer and the account had been accepted in writing by a designated Options Principal.51 Finally, Exchange Rule 1025, Supervision of Accounts, Rule 1028, Confirmations, and Rule 1029, Delivery of Options Disclosure Documents, will also apply to trading in of options on the Russell Indexes. Surveillance and Capacity The Exchange represents that it has an adequate surveillance program in place for options on the Russell U.S. Indexes and intends to apply those same procedures that it applies to the Exchange’s other index options. Additionally, the Exchange is a member of the Intermarket Surveillance Group (‘‘ISG’’) under the Intermarket Surveillance Group Agreement, dated June 20, 1994. The members of the ISG include all of the national securities exchanges. These members work together to coordinate surveillance and share information regarding the stock and options markets. In addition, the major futures exchanges are affiliated members of the ISG, which allows for the sharing of surveillance information for potential intermarket trading abuses. The Exchange also represents that it has the necessary systems capacity to support the new options series that would result from the introduction of options on the Full and Reduced Value Russell U.S. Indexes, including LEAPS on the Full Value Russell U.S. Indexes. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 52 in general, and furthers the objectives of Section 6(b)(5) of the Act 53 in particular, in that it will permit trading in options on Full and Reduced Value Russell U.S. Indexes pursuant to the rules designed to prevent fraudulent and manipulative acts and practices to protect investor and the public interest, promote just equitable principles of Exchange Rule 1026 (Suitability). Exchange Rule 1027 (Discretionary Accounts). Further, this Rule states that discretionary accounts shall receive frequent review by a Registered Options Principal qualified person specifically delegated such responsibilities under Rule 1025, who is not exercising the discretionary authority. 52 15 U.S.C. 78f(b). See Exchange Rules 1101A and 1012 (Series of Options Open for Trading). 53 15 U.S.C. 78f(b)(5). PO 00000 50 See trade. The Exchange also represents that it has the necessary systems capacity to support the new options series. As stated in the filing, the Exchange has rules in place designed to protect public customer trading. The Exchange believes that the Russell U.S. Indexes would provide investors additional trading opportunities. The Exchange believes that listing reduced value options would attract a greater source of customer business than if it listed only full value options on the Full Value Russell U.S. Indexes. The Exchange further believes that listing reduced value options would provide an opportunity for investors to hedge, or speculate on, the market risk associated with the stocks comprising the Russell U.S. Indexes and use this trading vehicle while extending a smaller outlay of capital. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days after the date of the filing, or such shorter time as the Commission may designate, it has become effective pursuant to 19(b)(3)(A) of the Act 54 and Rule 19b–4(f)(6) 55 thereunder. 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. If the 51 See Frm 00087 Fmt 4703 Sfmt 4703 54 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 55 17 E:\FR\FM\06JYN1.SGM 06JYN1 Federal Register / Vol. 76, No. 129 / Wednesday, July 6, 2011 / Notices Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments [FR Doc. 2011–16843 Filed 7–5–11; 8:45 am] Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File No. SR–Phlx–2011–87 on the subject line. sroberts on DSK5SPTVN1PROD with NOTICES 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 No. SR–Phlx–2011–87. 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 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 such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–Phlx–2011– 87 and should be submitted on or before July 27, 2011. VerDate Mar<15>2010 18:17 Jul 05, 2011 Jkt 223001 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.56 Cathy H. Ahn, Deputy Secretary. BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64769; File No. SR–NSCC– 2011–04] Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Proposed Rule Change To Amend Rules Relating to Discontinuing Dividend Settlement Service, Funds Only Settlement Service, Data Distribution Box Services, and Changes to the Envelope Settlement Service June 29, 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 June 15, 2011, National Securities Clearing Corporation (‘‘NSCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared primarily by NSCC.3 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 the Substance of the Proposed Rule Change The purpose of this proposed rule change is to amend NSCC’s rules relating to NSCC’s incorporation of its Dividend Settlement Service (‘‘DSS’’) and Funds Only Settlement Service (‘‘FOSS’’) into the Envelope Settlement Service (‘‘ESS’’) and NSCC’s discontinuing of its Data Distribution Boxes Service (‘‘DDBS’’). The proposed rule change would also make certain changes to ESS processing. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NSCC included statements concerning CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 The text of the proposed rule change is attached as Exhibit 5 to NSCC’s filing, which is available at https://www.dtcc.com/downloads/legal/rule_filings/ 2011/nscc/2011-04.pdf. PO 00000 39463 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. NSCC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of these statements.4 (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change DSS, FOSS, and ESS operate similarly in that they are non-guaranteed services of NSCC through which NSCC members exchange physical envelopes through a centralized location at NSCC. Pursuant to Rule 43 of NSCC’s Rules and Procedures, DSS centralizes claims processing for collection and payment of dividends and interest between NSCC members through the exchange of envelopes through the facilities of NSCC. Pursuant to Rule 41 of NSCC’s Rules and Procedures, FOSS centralizes money-only settlements for NSCC members through the exchange of paperwork delivered to and received by NSCC members through NSCC’s facilities. Pursuant to Rule 9 and Addendum D of NSCC’s Rules and Procedures, ESS allows an NSCC member to physically deliver a sealed envelope containing securities and such other items as NSCC may from time to time permit to a specified NSCC member. The money settlement associated with ESS, DSS, and FOSS transactions occurs through NSCC’s end-of-day settlement process. Discontinuing FOSS and DSS and Merging Functionality into ESS NSCC has offered DSS since its founding. FOSS was created in 1983 to remove money-only settlement activity, which prior to that time was included in ESS, from ESS in order to facilitate what was then NSCC’s guaranty of settlement of securities transactions processed through ESS.5 The use of each of these services has steadily declined in recent years due to increased dematerialization of securities and automation of transactions. In light of this decline and the elimination of the guaranty of ESS transactions, NSCC is proposing to amend its rules to discontinue the separate DSS and FOSS services and to allow members to 56 17 1 15 Frm 00088 Fmt 4703 Sfmt 4703 4 The Commission has modified the text of the summaries prepared by NSCC. 5 The guaranty of ESS settlement was in effect from 1983 until 2010. Securities Exchange Act Notice 34–61618 (March 1, 2010) [File No. SR– NSCC–2010–01], 75 FR 10542 (March 8, 2010). E:\FR\FM\06JYN1.SGM 06JYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 76, Number 129 (Wednesday, July 6, 2011)]
[Notices]
[Pages 39457-39463]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-16843]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64770; File No. SR-Phlx-2011-87]

Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX LLC Relating
to Listing and Trading Various Russell Products

June 29, 2011.
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 June 22, 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, 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.
---------------------------------------------------------------------------

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

The Exchange, pursuant to Section 19(b)(1) of the Act \3\ and Rule
19b-4 thereunder,\4\ proposes to amend Exchange Rules 1079, 1001A and
1101A to list and trade new options on various Russell \5\ Indexes
based upon the (i) full values of the Russell U.S. Indexes (``Full
Value Russell U.S. Indexes'') and (ii) one-tenth values of the Russell
U.S. Indexes (``Reduced Values Russell U.S. Indexes'').\6\ The text of
the proposed rule change is available on the Exchange's Web site at
https://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
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\3\ 15 U.S.C. 78s(b)(1).
\4\ 17 CFR 240.19b-4.
\5\ Russell refers to the Frank Russell Company. Information
about the Russell U.S. Indexes can also be found at https://www.russell.com/us/indexes/us/definitions.asp.
\6\ The Exchange currently lists cash-settled, European-style
FULL Value Russell Options and Reduced Value Russell Options,
including FLEX options and LEAPS, on the Russell 2000[supreg] Index
and the Mini-Russell 2000.
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
The purpose of the proposed rule change is to amend its Exchange
Rules 1079 (FLEX Index, Equity and Currency Options), 1001A (Position
Limits), and 1101A (Terms of Options Contracts) to list and trade cash-
settled, European-style options, including FLEX \7\ options and
LEAPS,\8\ on the following products (collectively ``Russell U.S.
Indexes''): Russell 3000[supreg] Index,\9\ Russell 3000[supreg] Value
Index,\10\ Russell 3000[supreg] Growth Index,\11\ Russell 2500\TM\
Index,\12\ Russell 2500\TM\ Value Index,\13\ Russell 2500\TM\ Growth
Index,\14\ Russell 2000[supreg] Value Index,\15\ Russell 2000[supreg]
Growth

[[Page 39458]]

Index,\16\ Russell 1000[supreg] Index,\17\ Russell 1000[supreg] Value
Index,\18\ Russell 1000[supreg] Growth Index,\19\ Russell Top
200[supreg] Index,\20\ Russell Top 200[supreg] Value Index,\21\ Russell
Top 200[supreg] Growth Index,\22\ Russell MidCap[supreg] Index,\23\
Russell MidCap[supreg] Value Index,\24\ Russell MidCap[supreg] Growth
Index,\25\ Russell Small Cap Completeness[supreg] Index,\26\ Russell
Small Cap Completeness[supreg] Value Index \27\ and Russell Small Cap
Completeness[supreg] Growth Index.\28\ The Exchange also proposes to
list and trade long-term options on each of the Full Value Russell U.S.
Indexes and Reduced Value Russell U.S. Indexes noted above (``Russell
LEAPS'').\29\
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\7\ FLEX Options are flexible exchange-traded index, equity, or
currency option contracts that provide investors the ability to
customize basic option features including size, expiration date,
exercise style, and certain exercise prices. FLEX Options may have
expiration dates within five years. See Exchange Rules 1079 and
1012.
\8\ LEAPS or Long Term Equity Anticipation Securities are long
term options that generally expire from twelve to thirty-nine months
from the time they are listed.
\9\ The Russell 3000 Index measures the performance of the
largest 3000 U.S. companies representing approximately 98% of the
investable U.S. equity market.
\10\ The Russell 3000 Value Index measures the performance of
the broad value segment of the U.S. equity universe. It includes
those Russell 3000 companies with lower price-to-book ratios and
lower forecasted growth values.
\11\ The Russell 3000 Growth Index measures the performance of
the broad growth segment of the U.S. equity universe. It includes
those Russell 3000 companies with higher price-to-book ratios and
higher forecasted growth values.
\12\ The Russell 2500 Index measures the performance of the
small to mid-cap segment of the U.S. equity universe, commonly
referred to as ``smid'' cap. The Russell 2500 Index is a subset of
the Russell 3000[supreg] Index.
\13\ The Russell 2500 Value Index measures the performance of
the small to mid-cap value segment of the U.S. equity universe. It
includes those Russell 2500 companies with lower price-to-book
ratios and lower forecasted growth values.
\14\ The Russell 2500 Growth Index measures the performance of
the small to mid-cap growth segment of the U.S. equity universe. It
includes those Russell 2500 companies with higher price-to-book
ratios and higher forecasted growth values.
\15\ The Russell 2000 Value Index measures the performance of
small-cap value segment of the U.S. equity universe. It includes
those Russell 2000 companies with lower price-to-book ratios and
lower forecasted growth values.
\16\ The Russell 2000 Growth Index measures the performance of
the small-cap growth segment of the U.S. equity universe. It
includes those Russell 2000 companies with higher price-to-book
ratios and higher forecasted growth values.
\17\ The Russell 1000 Index measures the performance of the
large-cap segment of the U.S. equity universe. It is a subset of the
Russell 3000[supreg] Index and includes approximately 1,000 of the
largest securities based on a combination of their market cap and
current index membership. The Russell 1000 represents approximately
92% of the Russell 3000 Index.
\18\ The Russell 1000 Value Index measures the performance of
the large-cap value segment of the U.S. equity universe. It includes
those Russell 1000 companies with lower price-to-book ratios and
lower expected growth values.
\19\ The Russell 1000 Growth Index measures the performance of
the large-cap growth segment of the U.S. equity universe. It
includes those Russell 1000 companies with higher price-to-book
ratios and higher forecasted growth values.
\20\ The Russell Top 200 Index measures the performance of the
largest cap segment of the U.S. equity universe. The Russell Top 200
Index is a subset of the Russell 3000[supreg] Index. It includes
approximately 200 of the largest securities based on a combination
of their market cap and current index membership and represents
approximately 65% of the U.S. market.
\21\ The Russell Top 200 Value Index measures the performance of
the especially large cap segment of the U.S. equity universe
represented by stocks in the largest 200 by market cap that exhibit
value characteristics. It includes Russell Top 200 companies with
lower price-to-book ratios and lower forecasted growth values. These
stocks also are members of the Russell 1000[supreg] Value Index.
\22\ The Russell Top 200 Growth Index offers measures the
performance of the especially large cap segment of the U.S. equity
universe represented by stocks in the largest 200 by market cap that
exhibit growth characteristics. It includes Russell Top 200 Index
companies with higher price-to-book ratios and higher forecast
growth values. The companies also are members of the Russell
1000[supreg] Growth Index.
\23\ The Russell Midcap Index measures the performance of the
mid-cap segment of the U.S. equity universe. The Russell Midcap
Index is a subset of the Russell 1000[supreg] Index. It includes
approximately 800 of the smallest securities based on a combination
of their market cap and current index membership. The Russell Midcap
Index represents approximately 27% of the total market
capitalization of the Russell 1000 companies.
\24\ The Russell Midcap Value Index measures the performance of
the mid-cap value segment of the U.S. equity universe. It includes
those Russell Midcap Index companies with lower price-to-book ratios
and lower forecasted growth values.
\25\ The Russell Midcap Growth Index measures the performance of
the mid-cap growth segment of the U.S. equity universe. It includes
those Russell Midcap Index companies with higher price-to-book
ratios and higher forecasted growth values.
\26\ The Russell Small Cap Completeness measures the performance
of the Russell 3000[supreg] Index companies excluding S&P 500
constituents.
\27\ The Russell Small Cap Completeness Value Index measures the
performance of the Russell 3000[supreg] Index companies excluding
S&P 500 constituents. It includes those Russell Small Cap
Completeness Index companies with lower price-to-book ratios and
lower forecasted growth values.
\28\ The Russell Small Cap Completeness Growth Index measures
the performance of the Russell 3000[supreg] Index companies
excluding S&P 500 constituents. It includes those Russell Small Cap
Completeness Index companies with higher price-to-book ratios and
higher forecast growth values.
\29\ Each of these Russell U.S. Indexes is a capitalization-
weighted index containing various groups of stocks drawn from the
largest 3,000 companies incorporated in the United States. All index
components are traded on the New York Stock Exchange (``NYSE''), the
NYSE Amex, Inc. (``NYSE Amex'') and/or the NASDAQ Stock Market LLC
(``NASDAQ''). Options on all of the indexes, currently trade on the
International Securities Exchange, LLC (``ISE'') and options on all
of the indexes, except for the Russell 2500 Index (regular, value,
and growth) and the Russell Small Cap Completeness Index (regular,
value, and growth), currently trade on the Chicago Board Options
Exchange (``CBOE''). The Russell 2000[supreg] Index is traded on
Phlx and the Boston Options Exchange (``BOX''). All of the Russell
U.S. Indexes are subsets of the Russell 3000 Index. The growth and
value versions of each primary index (Russell 3000, Russell 2500,
Russell 2000, Russell 1000, Russell Top 200, Russell Midcap, and
Russell Small Cap Completeness) may contain common components, but
the capitalization of those components is apportioned so that the
sum of the total capitalization of the growth and value indexes
equals the total capitalization of the respective primary index.
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Index Design and Composition
The Russell U.S. Indexes are designed to be a comprehensive
representation of the investable U.S. equity market. These indexes are
capitalization-weighted and include only common stocks belonging to
corporations domiciled in the United States. These indexes are traded
on NYSE, NYSE Amex and/or NASDAQ. Stocks are weighted by their
``available'' market capitalization, which is calculated by multiplying
the primary market price by the ``available'' shares; that is, total
shares outstanding less corporate cross-owned shares; shares owned by
Employee Stock Ownership Plans (``ESOPs'') and Leveraged Employee Stock
Ownership Plans (``LESOPs'') that comprise 10% or more of shares
outstanding; shares that are part of unlisted share classes; and shares
held by an individual, a group of individuals acting together, or a
corporation not in the index that owns 10% or more of the shares
outstanding; and shares subject to Initial Public Offering lock-ups.
All equity securities listed on NYSE, NYSE Amex or NASDAQ are
considered for inclusion in the Russell U.S. Indexes, with the
following exceptions: (1) Stocks trading less than $1.00 per share on
average during the month of May; (2) stocks of non-U.S. companies; (3)
preferred and convertible preferred stocks; (4) redeemable shares; (5)
participating preferred stocks; (6) warrants and rights; (7) trust
receipts; (8) royalty trusts; (9) limited liability companies; (10)
Bulletin Board and Pink Sheet stocks; (11) closed-end investment
companies; (12) limited partnerships; and (13) foreign stocks. All of
these stocks are ``reported securities'' as defined by Rule 11Aa3-
1(a)(4) under the Act.\30\ [sic]
---------------------------------------------------------------------------

\30\ 17 CFR 240.11Aa3-1(a)(4). [sic]
---------------------------------------------------------------------------

As of May 31, 2010, the stocks comprising the Russell 1000[supreg]
Index had an average market capitalization of $12.24 billion, ranging
from a high of $295.03 billion (Exxon Mobil Corp.) to a low of $0.14
billion (Seahawk Drilling Inc.). The number of available shares
outstanding averaged 401.41 million, ranging from a high of 28.98
billion (Citigroup Inc.) to a low of 6.17 million (NVR Inc.). The
Russell 1000[supreg] Index has a total capitalization of approximately
$11.7 trillion as of May 31, 2010.
As of May 31, 2010, the stocks comprising the Russell 1000[supreg]
Growth Index had an average market capitalization of $13.20 billion,
ranging from a high of $295.03 billion (Exxon Mobil Corp.) to a low of
$0.14 billion (Seahawk Drilling Inc.). The number of available shares
outstanding averaged 355.18 million, ranging from a high of 8.76
billion (Microsoft Corp.) to a low of 6.17 million (NVR Inc.). The
Russell 1000[supreg] Growth Index has a total capitalization of
approximately $8.2 trillion as of May 31, 2010.
As of May 31, 2010, the stocks comprising the Russell 1000[supreg]
Value Index had an average market capitalization of $11.31 billion,
ranging from a high of $295.03 billion (Exxon Mobil Corp.) to a low of
$0.14 billion (Seahawk Drilling Inc.). The number of available shares
outstanding averaged 429.04 million, ranging from a high of 28.98
billion (Citigroup Inc.) to a low of 6.17 million (NVR Inc.). The
Russell 1000[supreg] Value Index has a total capitalization of
approximately $7.6 trillion as of May 31, 2010.
As of May 31, 2010, the stocks comprising the Russell 2000[supreg]
Growth Index had an average market capitalization of $623.07 million,
ranging from a high of $4.53 billion (Human Genome Sciences Inc.) to a
low of $14.57 million (Repros Therapeutics Inc.). The number of
available shares outstanding averaged 44.06 million,

[[Page 39459]]

ranging from a high of 658.72 million (Cell Therapeutics) to a low of
2.02 million (Atrion Corp.). The Russell 2000[supreg] Growth Index has
a total capitalization of approximately $0.8 trillion as of May 31,
2010.
As of May 31, 2010, the stocks comprising the Russell 2000[supreg]
Value Index had an average market capitalization of $579.57 million,
ranging from a high of $3.34 billion (UAL Corp.) to a low of $26.15
million (Cardiac Science Corp.). The number of available shares
outstanding averaged 46.19 million, ranging from a high of 2.20 billion
(E*Trade Financial Corp.) to a low of 1.23 million (Seaboard Corp.).
The Russell 2000[supreg] Value Index has a total capitalization of
approximately $0.8 trillion as of May 31, 2010.
As of May 31, 2010, the stocks comprising the Russell 3000[supreg]
Index had an average market capitalization of $4.39 billion, ranging
from a high of $295.03 billion (Exxon Mobil Corp.) to a low of $14.57
million (Repros Therapeutics Inc.). The number of available shares
outstanding averaged 161.73 million, ranging from a high of 28.98
billion (Citigroup Inc.) to a low of 1.23 million (Seaboard Corp.). The
Russell 3000[supreg] Index has a total capitalization of approximately
$12.9 trillion as of May 31, 2010.
As of May 31, 2010, the stocks comprising the Russell 3000[supreg]
Growth Index had an average market capitalization of $4.77 billion,
ranging from a high of $295.03 billion (Exxon Mobil Corp.) to a low of
$14.57 million (Repros Therapeutics Inc.). The number of available
shares outstanding averaged 146.50 million ranging from a high of 8.76
billion (Microsoft Corp.) to a low of 2.02 million (Atrion Corp.). The
Russell 3000[supreg] Growth Index has a total capitalization of
approximately $9.0 trillion as of May 31, 2010.
As of May 31, 2010, the stocks comprising the Russell 3000[supreg]
Value Index had an average market capitalization of $4.10 billion,
ranging from a high of $295.03 billion (Exxon Mobil Corp.) to a low of
$26.15 million (Cardiac Science Corp.). The number of available shares
outstanding averaged 171.82 million, ranging from a high of 28.98
billion (Citigroup Inc.) to a low of 1.23 million (Seaboard Corp.). The
Russell 3000[supreg] Value Index has a total capitalization of
approximately $8.4 trillion as of May 31, 2010.
As of May 31, 2010, the stocks comprising the Russell
Midcap[supreg] Index had an average market capitalization of $4.59
billion, ranging from a high of $18.79 billion (TJX Cos Inc.) to a low
of $0.14 billion (Seahawk Drilling Inc.). The number of available
shares outstanding averaged 173.74 million, ranging from a high of 1.74
billion (Qwest Communications International) to a low of 6.17 million
(NVR Inc.). The Russell Midcap[supreg] Index has a total capitalization
of approximately $3.5 trillion as of May 31, 2010.
As of May 31, 2010, the stocks comprising the Russell
Midcap[supreg] Growth Index had an average market capitalization of
$4.71 billion, ranging from a high of $18.79 billion (TJX Cos Inc.) to
a low of $0.14 billion (Seahawk Drilling Inc.). The number of available
shares outstanding averaged 163.59 million, ranging from a high of 1.38
billion (Xerox Corp.) to a low of 6.17 million (NVR Inc.). The Russell
Midcap[supreg] Growth Index has a total capitalization of approximately
$2.3 trillion as of May 31, 2010.
As of May 31, 2010, the stocks comprising the Russell
Midcap[supreg] Value Index had an average market capitalization of 4.43
billion, ranging from a high of $15.48 billion (Las Vegas Sands Corp.)
to a low of $0.14 billion (Seahawk Drilling Inc.). The number of
available shares outstanding averaged 187.15 million, ranging from a
high of 1.74 billion (Qwest Communications International) to a low of
6.17 million (NVR Inc.). The Russell Midcap[supreg] Value Index has a
total capitalization of approximately $2.4 trillion as of May 31, 2010.
As of May 31, 2010, the stocks comprising the Russell Top
200[supreg] Index had an average market capitalization of $42.92
billion, ranging from a high of $295.03 billion (Exxon Mobil Corp.) to
a low of $2.24 billion (AOL Inc.). The number of available shares
outstanding averaged 1.31 billion, ranging from a high of 28.98 billion
(Citigroup Inc.) to a low of 48.90 million (Liberty Media Corp.--
Starz). The Russell Top 200[supreg] Index has a total capitalization of
approximately $8.2 trillion as of May 31, 2010.
As of May 31, 2010, the stocks comprising the Russell Top
200[supreg] Growth Index had an average market capitalization of $44.74
billion, ranging from a high of $295.03 billion (Exxon Mobil Corp.) to
a low of $9.11 billion (Boston Scientific Corp.) The number of
available shares outstanding averaged 1.07 billion, ranging from a high
of 8.76 billion (Microsoft Corp.) to a low of 64.32 million (Blackrock
Inc.). The Russell Top 200[supreg] Growth Index has a total
capitalization of approximately $5.9 trillion as of May 31, 2010.
As of May 31, 2010, the stocks comprising the Russell Top
200[supreg] Value Index had an average market capitalization of $41.52
billion, ranging from a high of $295.03 billion (Exxon Mobil Corp.) to
a low of $2.24 billion (AOL Inc.). The number of available shares
outstanding averaged 1.49 billion, ranging from a high of 28.98 billion
(Citigroup Inc.) to a low of 48.90 million (Liberty Media Corp.--
Starz). The Russell Top 200[supreg] Value Index has a total
capitalization of approximately $5.2 trillion as of May 31, 2010.
As of May 31, 2010, the stocks comprising the Russell 2500
^TM Index had an average market capitalization of $1.06
billion, ranging from a high of $10.19 billion (Centurylink Inc.) to a
low of $14.57 million (Repros Therapeutics Inc.). The number of
available shares outstanding averaged 62.53 million, ranging from a
high of 2.20 billion (E*Trade Financial Corp.) to a low of 1.23 million
(Seaboard Corp.). The Russell 2500 ^TM Index has a total
capitalization of approximately $2.6 trillion as of May 31, 2010.
As of May 31, 2010, the stocks comprising the Russell 2500
^TM Growth Index had an average market capitalization of
$1.07 billion, ranging from a high of $7.62 billion (Genworth Financial
Inc.) to a low of $14.57 million (Repros Therapeutics Inc.). The number
of available shares outstanding averaged 57.71 million, ranging from a
high of 673.37 million (Advanced Micro Devices Inc.) to a low of 2.02
million (Atrion Corp.). The Russell 2500 ^TM Growth Index has
a total capitalization of approximately $1.7 trillion as of May 31,
2010.
As of May 31, 2010, the stocks comprising the Russell
2500^TM Value Index had an average market capitalization of
$1.05 billion, ranging from a high of $10.19 billion (Centurylink Inc.)
to a low of $26.15 million (Cardiac Science Corp.). The number of
available shares outstanding averaged 65.34 million, ranging from a
high of 2.20 billion (E*Trade Financial Corp.) to a low of 1.23 million
(Seaboard Corp.). The Russell 2500 ^TM Value Index has a
total capitalization of approximately $1.8 trillion as of May 31, 2010.
As of May 31, 2010, the stocks comprising the Russell Small Cap
Completeness Index had an average market capitalization of $1.11
billion, ranging from a high of $31.67 billion (Blackrock Inc.) to a
low of $14.57 million (Repros Therapeutics Inc.). The number of
available shares outstanding averaged 61.07 million, ranging from a
high of 1.66 billion (Level 3 Communications Inc.) to a low of 1.23
million (Seaboard Corp.). The Russell Small Cap Completeness Index has
a total capitalization of approximately $2.7 trillion as of May 31,
2010.

[[Page 39460]]

As of May 31, 2010, the stocks comprising the Russell Small Cap
Completeness Growth Index had an average market capitalization of $1.17
billion, ranging from a high of $31.67 billion (Blackrock Inc.) to a
low of $14.57 million (Repros Therapeutics Inc.). The number of
available shares outstanding averaged 59.29 million, ranging from a
high of 1.24 billion (Activision Blizzard Inc.) to a low of 2.02
million (Atrion Corp.). The Russell Small Cap Completeness Growth Index
has a total capitalization of approximately $1.8 trillion as of May 31,
2010.
As of May 31, 2010, the stocks comprising the Russell Small Cap
Completeness Value Index had an average market capitalization of $1.08
billion, ranging from a high $31.67 billion (Blackrock Inc.) to a low
of $26.15 million (Cardiac Science Corp.). The number of available
shares outstanding averaged 62.61 million, ranging from a high of 1.66
billion (Level 3 Communications Inc.) to a low of 1.23 million
(Seaboard Corp.). The Russell Small Cap Completeness Value Index has a
total capitalization of approximately $1.8 trillion as of May 31, 2010.
Index Calculation and Index Maintenance
The value of each Russell Index is currently calculated by Reuters
Limited (``Reuters'') \31\ on behalf of Russell and is disseminated
every 15 seconds during regular Exchange trading hours to market
information vendors via RussellTick ^TM.\32\
---------------------------------------------------------------------------

\31\ Reuters is a ThomsonReuters company.
\32\ RussellTick \TM\, developed by NASDAQ OMX Information, LLC,
is a premier data feed that consolidates the distribution of the
Russell Family of Indexes. NASDAQ OMX is the primary distribution
source for all real-time Russell U.S. Indexes.
---------------------------------------------------------------------------

The methodology used to calculate the value of the Russell U.S.
Indexes is similar to the methodology used to calculate the value of
other well known market-capitalization-weighted indexes. The level of
each index reflects the total market value of the component stocks
relative to a particular base period and is computed by dividing the
total market value of the companies in each index by the respective
index divisor. The divisor is adjusted periodically to maintain
consistent measurement of the index. Below is a table of base dates and
the respective index levels as of May 26, 2011:

------------------------------------------------------------------------
Index Total value Price value
------------------------------------------------------------------------
Russell 3000 [supreg]..................... 3587.75086 1457.85247
Russell 3000 [supreg] Growth.............. 2879.89383 2426.1502
Russell 3000 [supreg] Value............... 3817.44497 2589.28728
Russell 1000 [supreg]..................... 3602.4988 1418.35062
Russell 1000 [supreg] Growth.............. 529.47313 403.83622
Russell 1000 [supreg] Value............... 725.61762 416.2859
Russell Top 200 [supreg].................. 2939.54016 546.63736
Russell Top 200 [supreg] Growth........... 910.11636 672.12634
Russell Top 200 [supreg] Value............ 1071.03283 651.91595
Russell Midcap [supreg]................... 6401.81184 2797.43808
Russell Midcap [supreg] Growth............ 1341.84209 1065.26732
Russell Midcap [supreg] Value............. 1793.62334 1125.65007
Russell 2000 [supreg]..................... 3726.27315 2064.91582
Russell 2000 [supreg] Growth.............. 3201.14137 2903.97679
Russell 2000 [supreg] Value............... 5864.70724 3980.15914
Russell 2500 TM........................... 1061.26992 772.74832
Russell 2500 TM Growth.................... 3547.792 3254.40744
Russell 2500 TM Value..................... 5493.08424 3839.81694
Russell Small Cap Completeness [supreg]... 2229.12739 1905.30123
Russell Small Cap Completeness [supreg] 1726.03596 1624.91776
Growth...................................
Russell Small Cap Completeness [supreg] 2732.41535 2105.81535
Value....................................
Russell 3000E [supreg] Index.............. 1298.3572 1156.55132
Russell 3000E [supreg] Growth Index....... 1297.56505 1211.74568
Russell 3000E [supreg] Value Index........ 1066.61795 938.33245
Russell Microcap [supreg] Index........... 1196.56615 1116.96383
Russell Microcap [supreg] Growth Index.... 1119.15656 1093.12822
Russell Microcap [supreg] Value Index..... 953.92585 870.2775
Russell 3000 [supreg] Dynamic Index \TM\.. 1059.29034 1054.09067
Russell 3000 [supreg] Defensive Index \TM\ 1073.79788 1063.74849
Russell 1000 [supreg] Dynamic Index \TM\.. 1059.42851 1053.97672
Russell 1000 [supreg] Defensive Index \TM\ 1073.99375 1063.61825
Russell 2000 [supreg] Dynamic Index \TM\.. 1057.89868 1055.42339
Russell 2000 [supreg] Defensive Index \TM\ 1071.77749 1065.42301
------------------------------------------------------------------------

In recent years, the value of the Russell U.S. Indexes has increased
significantly. As a result, the premium for options on the Full Russell
U.S. Indexes has also increased, causing these index options to trade
at a level that may be uncomfortably high for retail investors.
Therefore, the Exchange also proposes to trade Reduced Value Russell
U.S. Indexes. The Exchange believes that listing reduced value options
would attract a greater source of customer business than if it listed
only full value options on the Full Value Russell U.S. Indexes. The
Exchange further believes that listing reduced value options would
provide an opportunity for investors to hedge, or speculate on, the
market risk associated with the stocks comprising the Russell U.S.
Indexes and use this trading vehicle while extending a smaller outlay
of capital. The Exchange believes that this should attract additional
investors and, in turn, create a more active and liquid trading
environment.\33\
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\33\ The Exchange believes that reduced value options on Russell
U.S. Indexes have generated considerable interest from investors, as
measured, by their robust trading volume on CBOE and ISE.

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[[Page 39461]]

Options on the Russell U.S. Indexes would expire on the Saturday
following the third Friday of the expiration month (``Expiration
Saturday''). Trading in options on the Russell U.S. Indexes would
normally cease at 4:15 p.m. Eastern Standard Time (``EST'') \34\ on the
Thursday preceding an Expiration Saturday. The exercise settlement
value at expiration of each new index option would be calculated by
Reuters on behalf of Russell, based on the opening prices of the
index's component securities on the last business day prior to
expiration (``Settlement Day'').\35\ The Settlement Day is normally the
Friday preceding Expiration Saturday. If a component security in a
Russell Index does not trade on Settlement Day, the last reported sales
price in the primary market from the previous trading day would be used
to calculate both full and reduced settlement values. Settlement values
for the Full and Reduced Value Russell U.S. Indexes would be
disseminated via RussellTick\TM\.
---------------------------------------------------------------------------

\34\ See Exchange Rule 1001A. [sic]
\35\ The aggregate exercise value of the option contract is
calculated by multiplying the index value by the index multiplier,
which is 100.
---------------------------------------------------------------------------

The Russell U.S. Indexes are monitored and maintained by Russell,
which is responsible for making all necessary adjustments to the index
to reflect component deletions, share changes, stock splits, stock
dividends (other than ordinary cash dividends), and stock price
adjustments due to restructuring, mergers, or spin-offs involving the
underlying components. Some corporate actions, such as stock splits and
stock dividends, require simple changes to the available shares
outstanding and the stock prices of the underlying components. Other
corporate actions, such as share issuances, change the market value of
an index and require the use of an index divisor to effect adjustments.
The Russell U.S. Indexes are re-constituted annually on the last
Friday in June (unless the last Friday is the 27th or later of the
month, in which case the re-constitution occurs on the prior Friday),
based on prices and available shares outstanding as of the preceding
May 31. New index components are added only as part of the annual re-
constitution, after which, should a stock be removed from an index for
any reason, it could not be replaced until the next re-constitution
except in the case of a spin-off where the new company resulting from
the spin-off meets the membership criteria of one of the existing
indexes.
The Exchange represents that it would monitor the Russell U.S.
Indexes on a quarterly basis, and would not list any additional series
for trading and would limit all transactions in such options to closing
transactions only for the purpose of maintaining a fair and orderly
market and protecting investors if: (i) The number of securities in the
Index drops by one-third or more; (ii) 10% or more of the weight of the
Index is represented by component securities having a market value of
less than $75 million; (iii) less than 80% of the weight of the Index
is represented by component securities that are eligible for options
trading pursuant to Exchange Rules 1000A et seq.; (iv) 10% or more of
the weight of the Index is represented by component securities trading
less than 20,000 shares per day; or (v) the largest component security
accounts for more than 25% of the weight of the Index or the largest
five components in the aggregate account for more than 50% of the
weight of the Index. The Exchange represents that, if the Index ceases
to be maintained or calculated, or if the Index values are not
disseminated every 15 seconds by a widely available source, it would
not list any additional series for trading and would limit all
transactions in such options to closing transactions only for the
purpose of maintaining a fair and orderly market and protecting
investors.
Contract Specifications
The proposed contract specifications for the options on the Russell
U.S. Indexes are based on the contract specifications of similar
options currently listed on CBOE, NYSE Amex and ISE.\36\ The Russell
U.S. Indexes are broad-based indexes, as defined in Exchange Rule
1101A(a). Options on the Russell U.S. Indexes would be European-style
and a.m. cash-settled. The Exchange's standard trading hours for index
options (9:30 a.m. to 4:15 p.m. E.S.T.), as set forth in Exchange Rule
1101A at Commentary .01, would apply to options on the Russell U.S.
Indexes. Exchange Rules that apply to the trading of options on broad-
based indexes also would apply to options on both the Full and Reduced
Value Russell Indexes.\37\ The trading of these options also would be
subject to, among others, Exchange Rules governing margin requirements
\38\ and trading halt procedures \39\ for index options.
---------------------------------------------------------------------------

\36\ See note 27.
\37\ See generally Exchange Rules 1001A through 1107A (Rules
Applicable to Trading Options on Indices) and Exchange Rules 1000
through 1094 (Rules Applicable to Trading of Options on Stocks,
Exchange-Traded Fund Shares and Foreign Currencies).
\38\ See Exchange Rule 721 (Proper and Adequate Margin).
\39\ See Exchange Rule 1047A (Trading Rotations, Halts or
Reopenings).
---------------------------------------------------------------------------

For options on the Full Value Russell U.S. Indexes, the Exchange
proposes to establish an aggregate position limit of 50,000 contracts
on the same side of the market, provided that no more than 30,000 of
such contracts are in the nearest expiration month series. Full Value
Russell Index contracts would be aggregated with Reduced Value Russell
Index contracts, where ten Reduced Value Russell Index contracts would
equal one Full Value Russell Index contract.\40\ These limits are
identical to the limits applicable to options based on the Russell U.S.
Indexes that currently trade on ISE.\41\
---------------------------------------------------------------------------

\40\ See Exchange Rule 1001A(e). The same limits that apply to
position limits would apply to exercise limits for these products.
See Exchange Rule 1002A.
\41\ See ISE Rule 2004.
---------------------------------------------------------------------------

Additionally, Commentary .01 to Exchange Rule 1001A provides that
under certain circumstances index options positions may be exempted
from established position limits for each contract ``hedged'' by an
equivalent dollar amount of the underlying component securities.
Furthermore, Commentary .02 to that same Rule provides that member
organizations may receive exemptions of up to two times the applicable
position limit where the index options positions are in proprietary
accounts used for the purpose of facilitating orders for customers of
those member organizations.\42\ The Exchange proposes to apply existing
index margin requirements for the purchase and sale of options on the
Russell U.S. Indexes.\43\ Exchange Rule 1003 describes a member or
member organizations obligations to file with the Exchange a report of
that member or member organization's positions.\44\
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\42\ See Exchange Rule 1001A (Position Limits).
\43\ See Exchange Rule 721 (Proper and Adequate Margin).
\44\ See Exchange Rule 1003 (Reporting of Options Positions).
---------------------------------------------------------------------------

The Exchange proposes to set strike price intervals for these index
options at $2.50 when the strike price of Full or Reduced Value Options
Russell U.S. Indexes is below $200, and at least $5.00 strike price
intervals otherwise.\45\ The minimum tick size for series trading below
$3 would be $0.05 and for series trading at or above $3 would be
$0.10.\46\
---------------------------------------------------------------------------

\45\ See proposed Exchange Rule 1101A.
\46\ See Exchange Rule 1034 (Minimum Increments) and proposed
1101A (Position Limits).
---------------------------------------------------------------------------

Exchange Rule 1101A provides that after a particular class of stock
index options has been approved for listing

[[Page 39462]]

and trading on the Exchange, the Exchange shall from time to time open
for trading series of options therein. Within each approved class of
stock index options, the Exchange may open for trading series of
options expiring in consecutive calendar months (``consecutive month
series''), series of options expiring at three-month intervals (``cycle
month series''), and/or series of options having up to thirty-six
months to expiration (``long-term options series''). Prior to the
opening of trading in any series of stock index options, the Exchange
shall fix the expiration month and exercise price of option contracts
included in each such series.\47\
---------------------------------------------------------------------------

\47\ See Exchange Rule 1101A(b) as it currently exists.
---------------------------------------------------------------------------

The Exchange therefore, proposes to list options on the Full and
Reduced Value Russell U.S. Indexes in the three consecutive near-term
expiration months, plus up to three successive expiration months in the
March cycle. For example, consecutive expirations of June, July and
August, plus September, December and March expirations would be
listed.\48\ The trading of long-term options on the Russell U.S.
Indexes would be subject to the same rules that govern all the
Exchange's index options, including sales practice rules, margin
requirements, and trading rules.
---------------------------------------------------------------------------

\48\ See Exchange Rule 1101A.
---------------------------------------------------------------------------

All of the specifications and calculations for options on the
Reduced Value Russell U.S. Indexes would be the same as those used for
the Full Value Russell U.S. Indexes with position limits adjusted
accordingly for the Reduced Value Russell Options. The reduced-value
options would trade independently of, and in addition to, the full-
value options. Options on all the Russell U.S. Indexes would be subject
to the same rules that presently govern all Exchange index options,
including sales practice rules, margin requirements, trading rules, and
position and exercise limits.
Exchange Rules are designed to protect public customer trading.
Specifically, Rule 1024 prohibits members and member organizations from
accepting a customer order to purchase or write an option unless such
customer's account has been approved in writing by a designated Options
Principal of the Member.\49\ Additionally, Exchange Rule 1026,
regarding suitability, is designed to ensure that options are only sold
to customers capable of evaluating and bearing the risks associated
with trading in this instrument.\50\ Further, Exchange Rule 1027
permits members and employees of member organizations to exercise
discretionary power with respect to trading options in a customer's
account only if the member or employee of a member organization has
received prior written authorization from the customer and the account
had been accepted in writing by a designated Options Principal.\51\
Finally, Exchange Rule 1025, Supervision of Accounts, Rule 1028,
Confirmations, and Rule 1029, Delivery of Options Disclosure Documents,
will also apply to trading in of options on the Russell Indexes.
---------------------------------------------------------------------------

\49\ See Exchange Rule 1024 (Conduct of Accounts for Options
Trading).
\50\ See Exchange Rule 1026 (Suitability).
\51\ See Exchange Rule 1027 (Discretionary Accounts). Further,
this Rule states that discretionary accounts shall receive frequent
review by a Registered Options Principal qualified person
specifically delegated such responsibilities under Rule 1025, who is
not exercising the discretionary authority.
---------------------------------------------------------------------------

Surveillance and Capacity
The Exchange represents that it has an adequate surveillance
program in place for options on the Russell U.S. Indexes and intends to
apply those same procedures that it applies to the Exchange's other
index options. Additionally, the Exchange is a member of the
Intermarket Surveillance Group (``ISG'') under the Intermarket
Surveillance Group Agreement, dated June 20, 1994. The members of the
ISG include all of the national securities exchanges. These members
work together to coordinate surveillance and share information
regarding the stock and options markets. In addition, the major futures
exchanges are affiliated members of the ISG, which allows for the
sharing of surveillance information for potential intermarket trading
abuses.
The Exchange also represents that it has the necessary systems
capacity to support the new options series that would result from the
introduction of options on the Full and Reduced Value Russell U.S.
Indexes, including LEAPS on the Full Value Russell U.S. Indexes.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \52\ in general, and furthers the objectives of Section
6(b)(5) of the Act \53\ in particular, in that it will permit trading
in options on Full and Reduced Value Russell U.S. Indexes pursuant to
the rules designed to prevent fraudulent and manipulative acts and
practices to protect investor and the public interest, promote just
equitable principles of trade. The Exchange also represents that it has
the necessary systems capacity to support the new options series. As
stated in the filing, the Exchange has rules in place designed to
protect public customer trading.
---------------------------------------------------------------------------

\52\ 15 U.S.C. 78f(b). See Exchange Rules 1101A and 1012 (Series
of Options Open for Trading).
\53\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

The Exchange believes that the Russell U.S. Indexes would provide
investors additional trading opportunities. The Exchange believes that
listing reduced value options would attract a greater source of
customer business than if it listed only full value options on the Full
Value Russell U.S. Indexes. The Exchange further believes that listing
reduced value options would provide an opportunity for investors to
hedge, or speculate on, the market risk associated with the stocks
comprising the Russell U.S. Indexes and use this trading vehicle while
extending a smaller outlay of capital.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to 19(b)(3)(A) of the Act \54\ and Rule 19b-4(f)(6) \55\
thereunder.
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\54\ 15 U.S.C. 78s(b)(3)(A).
\55\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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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. If the

[[Page 39463]]

Commission takes such action, the Commission shall institute
proceedings to determine whether the proposed rule should be approved
or 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 No. SR-Phlx-2011-87 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 No. SR-Phlx-2011-87. 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 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 such filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File No. SR-Phlx-2011-87 and should be
submitted on or before July 27, 2011.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\56\
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\56\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-16843 Filed 7-5-11; 8:45 am]
BILLING CODE 8011-01-P

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