Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing of Proposed Rule Change to Modify Commentary .01 to Rule 1009 Regarding Criteria for Listing an Option on an Underlying Covered Security, 70520-70523 [2011-29300]

Download as PDF 70520 Federal Register / Vol. 76, No. 219 / Monday, November 14, 2011 / Notices SECURITIES AND EXCHANGE COMMISSION [File No. 500–1] Rovac Corp., RS Group of Companies, Inc., Rymer Foods, Inc. Stratus Services Group, Inc., Sun Cal Energy, Inc., Sun Motor International, Inc., Surebet Casinos, Inc., and Swiss Medica, Inc.; Order of Suspension of Trading mstockstill on DSK4VPTVN1PROD with NOTICES November 9, 2011 It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Rovac Corp. because it has not filed any periodic reports since the period ended July 31, 2001. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of RS Group of Companies, Inc. because it has not filed any periodic reports since the period ended March 31, 2006. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Rymer Foods, Inc. because it has not filed any periodic reports since July 28, 2001. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Stratus Services Group, Inc. because it has not filed any periodic reports since the period ended June 30, 2008. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Sun Cal Energy, Inc. because it has not filed any periodic reports since the period ended March 31, 2009. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Sun Motor International, Inc. because it has not filed any periodic reports since the period ended June 30, 2007. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Surebet Casinos, Inc. because it has not filed any periodic reports since the period ended March 31, 2003. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Swiss Medica, Inc. because it has not filed any periodic reports since the period ended June 30, 2007. VerDate Mar<15>2010 19:40 Nov 10, 2011 Jkt 226001 The Commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above-listed companies. Therefore, it is ordered, pursuant to Section 12(k) of the Securities Exchange Act of 1934, that trading in the securities of the above-listed companies is suspended for the period from 9:30 a.m. EST on November 9, 2011, through 11:59 p.m. EST on November 22, 2011. By the Commission. Elizabeth M. Murphy, Secretary. [FR Doc. 2011–29414 Filed 11–9–11; 11:15 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [File No. 500–1] RMD Technologies, Inc., Rockwall Holdings, Inc., Southmark Corp., Stargold Mines, Inc., Stelax Industries, Ltd., Stem Cell Innovations, Inc., and Surfect Holdings, Inc.; Order of Suspension of Trading November 9, 2011. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of RMD Technologies, Inc. because it has not filed any periodic reports since the period ended February 29, 2008. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Rockwall Holdings, Inc. because it has not filed any periodic reports since the period ended December 31, 2008. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Southmark Corp. because it has not filed any periodic reports since the period ended June 30, 1996. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Stargold Mines, Inc. because it has not filed any periodic reports since the period ended September 30, 2008. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Stelax Industries, Ltd. because it has not filed any periodic reports since the period ended September 30, 2007. It appears to the Securities and Exchange Commission that there is a PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 lack of current and accurate information concerning the securities of Stem Cell Innovations, Inc. because it has not filed any periodic reports since the period ended September 30, 2007. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Surfect Holdings, Inc. because it has not filed any periodic reports since the period ended December 31, 2008. The Commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above-listed companies. Therefore, it is ordered, pursuant to Section 12(k) of the Securities Exchange Act of 1934, that trading in the securities of the above-listed companies is suspended for the period from 9:30 a.m. E.S.T. on November 9, 2011, through 11:59 p.m. E.S.T. on November 22, 2011. By the Commission. Elizabeth M. Murphy, Secretary. [FR Doc. 2011–29413 Filed 11–9–11; 11:15 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–65706; File No. SR–Phlx– 2011–143] Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing of Proposed Rule Change to Modify Commentary .01 to Rule 1009 Regarding Criteria for Listing an Option on an Underlying Covered Security November 8, 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 October 24, 2011, NASDAQ OMX PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 2 17 E:\FR\FM\14NON1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 14NON1 Federal Register / Vol. 76, No. 219 / Monday, November 14, 2011 / Notices I. Self-Regulatory Organization’s Statement of the Terms of 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 Commentary .01 to Rule 1009 to modify the criteria for listing options on an underlying covered security. 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. 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. mstockstill on DSK4VPTVN1PROD with NOTICES 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 Commentary .01 to Rule 1009 to modify the criteria for listing options on an underlying covered security as defined in Section 18(b)(1)(A) of the Securities Act of 1933 (hereinafter ‘‘covered security(ies)’’). The Exchange proposes to modify Rule 1009, Commentary .01(4)(i) to permit the listing of an option on an underlying covered security that has a market price of at least $3.00 per share on the business day immediately preceding the date on which the Exchange submits a certificate to the Options Clearing Corporation (‘‘OCC’’) for listing and trading. The Exchange does not intend to amend any other criteria for listing options on an underlying security in Rule 1009 and accompanying Commentary. Currently the underlying covered security must have a closing market price of $3.00 per share for five consecutive business days preceding the date on which the Exchange submits a 3 15 4 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Mar<15>2010 19:40 Nov 10, 2011 Jkt 226001 listing certificate to OCC. In the proposed amendment, the market price will still be measured by the closing price reported in the primary market in which the underlying covered security is traded; however, the measurement will be the price on the business day immediately preceding the submission of the listing certificate, instead of the prior five consecutive business days. The Exchange acknowledges that the Options Listing Procedures Plan 5 requires that the listing certificate be provided to OCC no earlier than 12:01 a.m. and no later than 11 a.m. (Chicago time) on the trading day prior to the day on which trading is to begin.6 The proposed amendment will still comport with that requirement. For example, if an initial public offering occurs at 11 a.m. on Monday, the earliest date the Exchange could submit its listing certificate to OCC would be on Tuesday by 12:01 a.m. (Chicago time), with the market price determined by the closing price on Monday. The option on the initial public offering would be eligible for trading on the Exchange on Wednesday. The proposed amendment would essentially enable options trading within two business days of an initial public offering becoming available instead of six business days (five consecutive business days plus the day the listing certificate is submitted to OCC). The Exchange’s current provision of the ‘‘look back’’ period of five consecutive business days assumed the five-day period was necessary to protect against attempts to manipulate the market.7 Surveillance technologies and procedures concerning manipulation have evolved over the last decade to 5 On July 6, 2001, the Commission approved the Plan for the Purpose of Developing and Implementing Procedures Designed to Facilitate the Listing and Trading of Standardized Options Submitted Pursuant to Section 11a(2)(3)(B) [sic] of the Securities Exchange Act of 1934 (a/k/a the Options Listing Procedures Plan (‘‘OLPP’’)), which was proposed by the American Stock Exchange LLC (‘‘Amex’’), Chicago Board Options Exchange, Incorporated (‘‘CBOE’’), International Securities Exchange LLC (‘‘ISE’’), Options Clearing Corporation (‘‘OCC’’), Philadelphia Stock Exchange, Inc. (‘‘Phlx’’), and Pacific Exchange, Inc. (‘‘PCX’’) (n/k/a NYSE Arca). See Securities Exchange Act Release No. 44521, 66 FR 36809 (July 13, 2001). On February 5, 2004, Boston Stock Exchange, Inc. (‘‘BSE’’) was added as a Sponsor to OLPP. See Securities Exchange Act Release No. 49199, 69 FR 7030 (February 12, 2004). On March 21, 2008, the Nasdaq Stock Market, LLC (‘‘Nasdaq’’) was added as a Sponsor to the OLPP. See Securities Exchange Act Release No. 57546, 73 FR 16393 (March 27, 2008). On February 17, 2010, BATS Exchange, Inc. (‘‘BATS’’) was added as a Sponsor to the OLPP. See Securities Exchange Act Release No. 61528, 75 FR 8415 (February 24, 2010). 6 See OLPP at page 3. 7 See Release No. 47794 (May 5, 2003), 68 FR 25076 (May 9, 2003) (SR–Phlx–2003–27). PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 70521 provide adequate prevention or detection of rule or securities law violations and the disciplining of the Exchange’s members and persons associated with them for violation of such rules or laws. Surveillance for opening price manipulation and other existing surveillance patterns are utilized to monitor trading in options. The Exchange represents that these surveillance procedures are adequate to monitor the trading of options on the Exchange. In addition, the Exchange has complete access to information regarding trading activity of the underlying securities and options thereon. Furthermore, pursuant to Rule 1047(c), trading in any option may be halted by an Options Exchange Official whenever the Options Exchange Official deems such action appropriate in the interest of a fair and orderly market and to protect investors. The combination of the surveillance technologies and procedures, coupled with Rule 1047(c) provide a sufficient measure of protection from any attempts of market manipulation. The proposed change will apply to all covered securities that meet the criteria of Exchange Rule 1009. Pursuant to Exchange Rule 1009, the Exchange Board of Directors (the ‘‘Exchange Board’’) establishes guidelines to be considered by the Exchange in evaluating potential underlying securities for Exchange option transactions.8 However, the fact that a particular security may meet the guidelines established by the Exchange Board does not necessarily mean that it will be approved as an underlying security.9 As part of the established criteria, the issuer must be in compliance with any applicable requirement of the Securities Exchange Act of 1934.10 Additionally, in considering the underlying security, the Exchange relies on information made publicly available by the issuer and/or the market in which the security is traded.11 Also, in determining whether to list an option that otherwise meets the objective listing criteria, the Chairman of the Exchange Board or his designee may consider, inter alia, the name recognition of the option or underlying security.12 Even if the proposed option meets the objective criteria, the Chair of the Exchange Board 8 See Exchange Rule 1009(b). The Exchange Board established specific criteria to consider by the Exchange in evaluating potential underlying securities for Exchange Option Transactions in its Commentary to Exchange Rule 1009. 9 Id. 10 See Exchange Rule 1009, Commentary .01(5). 11 See Exchange Rule 1009, Commentary .02(d). 12 See Exchange Rule 1009 Commentary .02(e). E:\FR\FM\14NON1.SGM 14NON1 70522 Federal Register / Vol. 76, No. 219 / Monday, November 14, 2011 / Notices may decide not to list or place limitations or conditions upon listing.13 The Exchange believes these measures, along with its surveillance of the trading of options, provide adequate safeguards in the review of any covered security that may meet the proposed criteria for consideration of the option within the timeframe contained in this proposal. Just as important, investors have requested that the Exchange offer options on initial public offerings sooner than the six business days time frame in order to provide the opportunity to hedge existing positions post-haste. As such, the Exchange believes the proposed amendment will allow the Exchange to provide investors with the options that are most useful and demanded by them without sacrificing any investor protections. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 14 in general, and furthers the objectives of Section 6(b)(5) of the Act 15 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest, by allowing the Exchange to swiftly list options on a qualifying security that has met the $3.00 eligibility price to meet the investor demands. The proposed amendment will remove impediments and perfect the mechanism of a free and open market and a national market system by providing an avenue for investors of an initial public offering, who are restricted from selling shares, to swiftly hedge their investment in the stock without the time delay. B. Self-Regulatory Organization’s Statement on Burden on Competition mstockstill on DSK4VPTVN1PROD with NOTICES The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were either solicited or received. 13 See Exchange Rule 1009, Commentary .02(c). U.S.C. 78f(b). 15 15 U.S.C. 78f(b)(5). 14 15 VerDate Mar<15>2010 19:40 Nov 10, 2011 Jkt 226001 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove such proposed rule change, or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. The Commission is asking that commenters address the merit of Phlx’s statements in support of the proposed rule change, in addition to any other comments they may wish to submit about the proposed rule change. The Commission notes that, prior to 2003, in order to qualify as underlying securities for options traded on national securities exchanges, covered securities were required to have a closing market price of at least $7.50 per share for the majority of business days during the three calendar months preceding the date of selection.16 In proposing the $3 per share closing market price requirement and the fiveday ‘‘look back’’ period that is the current requirement on Phlx and other national securities exchanges that list options, Phlx stated that the ‘‘look back’’ period of five consecutive days ‘‘would provide a sufficient measure of protection from any attempts to manipulate the market price of the underlying security.’’ 17 The Exchange further stated that it believed that the proposed $3 price standard and the fiveday ‘‘look back’’ period would ‘‘provide a reliable test for stability [and] would present a more reasonable time period for qualifying the price of an underlying security.’’ 18 In approving the five-day ‘‘look back’’ period proposal, the 16 See Securities Exchange Act Release No. 47794 (May 5, 2003), 68 FR 25076 (May 9, 2003) (SR– Phlx–2003–27) (‘‘Phlx Five-Day Notice’’) (notice of filing and immediate effectiveness of proposed rule change relating to the amendment of price criteria for certain securities that underlie options traded on the Exchange). See also Securities Exchange Act Release No. 46957 (December 6, 2002), 67 FR 77106 (December 16, 2002) (SR–CBOE–2002–62). 17 Phlx Five-Day Notice at 25078. 18 Id. PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 Commission stated that the proposed requirements, coupled with an exchange’s additional listing requirements, would enable the listing of options on companies that are financially sound.19 In light of the foregoing, what are commenters’ views as to whether Phlx’s proposed initial listing standard and existing initial and maintenance listing standards would be sufficient to assure price stability of the underlying covered security? For example, the proposed standard would allow the listing of options on a stock that traded above $3 for only one day. What are commenters’ views as to how the proposed ‘‘look back’’ period would impact concerns about the ability to manipulate the market? What are commenters’ views on whether surveillance technologies and procedures concerning manipulation have evolved sufficiently to adequately prevent or detect potential violations of securities laws and rules and regulations thereunder resulting from this proposed rule change? 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 email to rulecomments@sec.gov. Please include File Number SR–Phlx–2011–143 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–Phlx–2011–143. This file number should be included on the subject line if email 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 19 The Chicago Board Options Exchange was the first exchange to propose the $3 per share closing market price requirement and the five-day ‘‘look back’’ period. See Securities Exchange Act Release No. 47190 (January 15, 2003), 68 FR 3072, 3072– 73 (January 22, 2003) (SR–CBOE–2002–62) (order approving proposed rule change to amend CBOE rule which establishes the pricing criteria for securities that underlie options traded on the Exchange). E:\FR\FM\14NON1.SGM 14NON1 Federal Register / Vol. 76, No. 219 / Monday, November 14, 2011 / Notices communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–Phlx– 2011–143 and should be submitted on or before December 5, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2011–29300 Filed 11–10–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–65700; File No. SR–FINRA– 2011–064] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change to Adopt FINRA Rule 4524 (Supplemental FOCUS Information) and Proposed Supplementary Schedule to the Statement of Income (Loss) Page of FOCUS Reports mstockstill on DSK4VPTVN1PROD with NOTICES 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 November 1, 2011, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) 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 FINRA. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1. Purpose Pursuant to SEA Rule 17a–5, members are required to file with FINRA reports concerning their financial and operational status using SEC Form X– 17A–5, Financial and Operational Combined Uniform Single (FOCUS) Report.3 SEA Rule 17a-5 generally requires members that clear transactions or carry customer accounts to file a FOCUS Report Part II, and requires certain other members to file a FOCUS Report Part IIA. Members that use Appendix E to SEA Rule 15c3–1 to calculate net capital file a FOCUS Report Part II CSE 4 that is similar to the FOCUS Report Part II (collectively, the 3 17 CFR 240.17a–5. broker-dealer that calculates its net capital under Appendix E of SEA Rule 15c3–1 is referred to as Alternative Net Capital (‘‘ANC’’) firm. 20 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 19:40 Nov 10, 2011 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA 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. FINRA 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 November 7, 2011. VerDate Mar<15>2010 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to adopt FINRA Rule 4524 (Supplemental FOCUS Information) to require each member, as FINRA shall designate, to file such additional financial or operational schedules or reports as FINRA may deem necessary as a supplement to the FOCUS report. The content of such supplemental schedules or reports would be specified in a Regulatory Notice (or similar communication), which FINRA would file with the SEC pursuant to proposed FINRA Rule 4524. As part of the proposed rule change, FINRA is filing one such proposed schedule, a supplement to the Statement of Income (Loss) page of the FOCUS Report. The text of the proposed rule change is available on FINRA’s Web site at https://www.finra.org, at the principal office of FINRA and at the Commission’s Public Reference Room. 4A Jkt 226001 PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 70523 FOCUS Reports Part II, Part IIA, and Part II CSE are referred to hereinafter as ‘‘FOCUS Reports’’). FINRA is proposing to adopt FINRA Rule 4524, a rule that would provide the mechanism by which FINRA can obtain from members more detailed financial information to augment the FOCUS reports required to be filed pursuant to SEA Rule 17a–5. Proposed FINRA Rule 4524 would require members to file such additional financial or operational schedules or reports to supplement FOCUS reports as FINRA may deem necessary or appropriate for the protection of investors or in the public interest.5 Thus, the rule would provide FINRA the framework to request more specific information regarding, among other things, the assets and liabilities of a member, the generation of revenues and allocation of expenses by business segment or product lines, the sources of trading gains and losses, the types and amounts of fees earned, and the nature and extent of participation in securities offerings. Depending on the nature of the proposed supplemental schedule or report, FINRA may require that all members or any specified subset of members submit the schedule or report to FINRA. FOCUS Reports provide FINRA with valuable information regarding a member’s business; however, FINRA believes that it can better discharge its regulatory obligations with the benefit of additional information that gives FINRA a more complete and detailed view of a member’s business operations. Accordingly, proposed FINRA Rule 4524 would provide FINRA a means and process to obtain greater transparency into a member’s business activities and to better illuminate industry trends, allowing for more focused and effective examinations. FINRA would effectuate proposed FINRA Rule 4524 by way of a Regulatory Notice or similar communication, the content of which would be filed with the Commission. To that end, as an initial report required pursuant to proposed FINRA Rule 4524, FINRA is also proposing a Supplemental Statement of Income (‘‘SSOI’’) to magnify the data from the Statement of Income (Loss) page of the FOCUS Reports.6 The proposed SSOI is intended to capture more granular detail of a firm’s revenue and expense information. The lack of more specific revenue and expense categories for certain business 5 Nothing in proposed FINRA Rule 4524 should be construed as altering in any manner a member’s obligations under SEA Rule 17a–5(a)(2)(iv). 6 See Exhibit 3. E:\FR\FM\14NON1.SGM 14NON1

Agencies

[Federal Register Volume 76, Number 219 (Monday, November 14, 2011)]
[Notices]
[Pages 70520-70523]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-29300]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65706; File No. SR-Phlx-2011-143]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing of Proposed Rule Change to Modify Commentary .01 to Rule 1009 
Regarding Criteria for Listing an Option on an Underlying Covered 
Security

November 8, 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 October 24, 2011, NASDAQ OMX PHLX LLC (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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[[Page 70521]]

I. Self-Regulatory Organization's Statement of the Terms of 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 Commentary .01 to Rule 1009 to 
modify the criteria for listing options on an underlying covered 
security.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78s(b)(1).
    \4\ 17 CFR 240.19b-4.
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    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.

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 Commentary .01 
to Rule 1009 to modify the criteria for listing options on an 
underlying covered security as defined in Section 18(b)(1)(A) of the 
Securities Act of 1933 (hereinafter ``covered security(ies)''). The 
Exchange proposes to modify Rule 1009, Commentary .01(4)(i) to permit 
the listing of an option on an underlying covered security that has a 
market price of at least $3.00 per share on the business day 
immediately preceding the date on which the Exchange submits a 
certificate to the Options Clearing Corporation (``OCC'') for listing 
and trading. The Exchange does not intend to amend any other criteria 
for listing options on an underlying security in Rule 1009 and 
accompanying Commentary.
    Currently the underlying covered security must have a closing 
market price of $3.00 per share for five consecutive business days 
preceding the date on which the Exchange submits a listing certificate 
to OCC. In the proposed amendment, the market price will still be 
measured by the closing price reported in the primary market in which 
the underlying covered security is traded; however, the measurement 
will be the price on the business day immediately preceding the 
submission of the listing certificate, instead of the prior five 
consecutive business days.
    The Exchange acknowledges that the Options Listing Procedures Plan 
\5\ requires that the listing certificate be provided to OCC no earlier 
than 12:01 a.m. and no later than 11 a.m. (Chicago time) on the trading 
day prior to the day on which trading is to begin.\6\ The proposed 
amendment will still comport with that requirement. For example, if an 
initial public offering occurs at 11 a.m. on Monday, the earliest date 
the Exchange could submit its listing certificate to OCC would be on 
Tuesday by 12:01 a.m. (Chicago time), with the market price determined 
by the closing price on Monday. The option on the initial public 
offering would be eligible for trading on the Exchange on Wednesday. 
The proposed amendment would essentially enable options trading within 
two business days of an initial public offering becoming available 
instead of six business days (five consecutive business days plus the 
day the listing certificate is submitted to OCC).
---------------------------------------------------------------------------

    \5\ On July 6, 2001, the Commission approved the Plan for the 
Purpose of Developing and Implementing Procedures Designed to 
Facilitate the Listing and Trading of Standardized Options Submitted 
Pursuant to Section 11a(2)(3)(B) [sic] of the Securities Exchange 
Act of 1934 (a/k/a the Options Listing Procedures Plan (``OLPP'')), 
which was proposed by the American Stock Exchange LLC (``Amex''), 
Chicago Board Options Exchange, Incorporated (``CBOE''), 
International Securities Exchange LLC (``ISE''), Options Clearing 
Corporation (``OCC''), Philadelphia Stock Exchange, Inc. (``Phlx''), 
and Pacific Exchange, Inc. (``PCX'') (n/k/a NYSE Arca). See 
Securities Exchange Act Release No. 44521, 66 FR 36809 (July 13, 
2001). On February 5, 2004, Boston Stock Exchange, Inc. (``BSE'') 
was added as a Sponsor to OLPP. See Securities Exchange Act Release 
No. 49199, 69 FR 7030 (February 12, 2004). On March 21, 2008, the 
Nasdaq Stock Market, LLC (``Nasdaq'') was added as a Sponsor to the 
OLPP. See Securities Exchange Act Release No. 57546, 73 FR 16393 
(March 27, 2008). On February 17, 2010, BATS Exchange, Inc. 
(``BATS'') was added as a Sponsor to the OLPP. See Securities 
Exchange Act Release No. 61528, 75 FR 8415 (February 24, 2010).
    \6\ See OLPP at page 3.
---------------------------------------------------------------------------

    The Exchange's current provision of the ``look back'' period of 
five consecutive business days assumed the five-day period was 
necessary to protect against attempts to manipulate the market.\7\ 
Surveillance technologies and procedures concerning manipulation have 
evolved over the last decade to provide adequate prevention or 
detection of rule or securities law violations and the disciplining of 
the Exchange's members and persons associated with them for violation 
of such rules or laws. Surveillance for opening price manipulation and 
other existing surveillance patterns are utilized to monitor trading in 
options. The Exchange represents that these surveillance procedures are 
adequate to monitor the trading of options on the Exchange. In 
addition, the Exchange has complete access to information regarding 
trading activity of the underlying securities and options thereon. 
Furthermore, pursuant to Rule 1047(c), trading in any option may be 
halted by an Options Exchange Official whenever the Options Exchange 
Official deems such action appropriate in the interest of a fair and 
orderly market and to protect investors. The combination of the 
surveillance technologies and procedures, coupled with Rule 1047(c) 
provide a sufficient measure of protection from any attempts of market 
manipulation.
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    \7\ See Release No. 47794 (May 5, 2003), 68 FR 25076 (May 9, 
2003) (SR-Phlx-2003-27).
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    The proposed change will apply to all covered securities that meet 
the criteria of Exchange Rule 1009. Pursuant to Exchange Rule 1009, the 
Exchange Board of Directors (the ``Exchange Board'') establishes 
guidelines to be considered by the Exchange in evaluating potential 
underlying securities for Exchange option transactions.\8\ However, the 
fact that a particular security may meet the guidelines established by 
the Exchange Board does not necessarily mean that it will be approved 
as an underlying security.\9\ As part of the established criteria, the 
issuer must be in compliance with any applicable requirement of the 
Securities Exchange Act of 1934.\10\ Additionally, in considering the 
underlying security, the Exchange relies on information made publicly 
available by the issuer and/or the market in which the security is 
traded.\11\ Also, in determining whether to list an option that 
otherwise meets the objective listing criteria, the Chairman of the 
Exchange Board or his designee may consider, inter alia, the name 
recognition of the option or underlying security.\12\ Even if the 
proposed option meets the objective criteria, the Chair of the Exchange 
Board

[[Page 70522]]

may decide not to list or place limitations or conditions upon 
listing.\13\ The Exchange believes these measures, along with its 
surveillance of the trading of options, provide adequate safeguards in 
the review of any covered security that may meet the proposed criteria 
for consideration of the option within the timeframe contained in this 
proposal.
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    \8\ See Exchange Rule 1009(b). The Exchange Board established 
specific criteria to consider by the Exchange in evaluating 
potential underlying securities for Exchange Option Transactions in 
its Commentary to Exchange Rule 1009.
    \9\ Id.
    \10\ See Exchange Rule 1009, Commentary .01(5).
    \11\ See Exchange Rule 1009, Commentary .02(d).
    \12\ See Exchange Rule 1009 Commentary .02(e).
    \13\ See Exchange Rule 1009, Commentary .02(c).
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    Just as important, investors have requested that the Exchange offer 
options on initial public offerings sooner than the six business days 
time frame in order to provide the opportunity to hedge existing 
positions post-haste. As such, the Exchange believes the proposed 
amendment will allow the Exchange to provide investors with the options 
that are most useful and demanded by them without sacrificing any 
investor protections.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \14\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \15\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest, by allowing the Exchange to swiftly list options on a 
qualifying security that has met the $3.00 eligibility price to meet 
the investor demands. The proposed amendment will remove impediments 
and perfect the mechanism of a free and open market and a national 
market system by providing an avenue for investors of an initial public 
offering, who are restricted from selling shares, to swiftly hedge 
their investment in the stock without the time delay.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

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

    No written comments were either solicited or received.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. The Commission is asking that 
commenters address the merit of Phlx's statements in support of the 
proposed rule change, in addition to any other comments they may wish 
to submit about the proposed rule change. The Commission notes that, 
prior to 2003, in order to qualify as underlying securities for options 
traded on national securities exchanges, covered securities were 
required to have a closing market price of at least $7.50 per share for 
the majority of business days during the three calendar months 
preceding the date of selection.\16\ In proposing the $3 per share 
closing market price requirement and the five-day ``look back'' period 
that is the current requirement on Phlx and other national securities 
exchanges that list options, Phlx stated that the ``look back'' period 
of five consecutive days ``would provide a sufficient measure of 
protection from any attempts to manipulate the market price of the 
underlying security.'' \17\ The Exchange further stated that it 
believed that the proposed $3 price standard and the five-day ``look 
back'' period would ``provide a reliable test for stability [and] would 
present a more reasonable time period for qualifying the price of an 
underlying security.'' \18\ In approving the five-day ``look back'' 
period proposal, the Commission stated that the proposed requirements, 
coupled with an exchange's additional listing requirements, would 
enable the listing of options on companies that are financially 
sound.\19\ In light of the foregoing, what are commenters' views as to 
whether Phlx's proposed initial listing standard and existing initial 
and maintenance listing standards would be sufficient to assure price 
stability of the underlying covered security? For example, the proposed 
standard would allow the listing of options on a stock that traded 
above $3 for only one day. What are commenters' views as to how the 
proposed ``look back'' period would impact concerns about the ability 
to manipulate the market? What are commenters' views on whether 
surveillance technologies and procedures concerning manipulation have 
evolved sufficiently to adequately prevent or detect potential 
violations of securities laws and rules and regulations thereunder 
resulting from this proposed rule change?
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    \16\ See Securities Exchange Act Release No. 47794 (May 5, 
2003), 68 FR 25076 (May 9, 2003) (SR-Phlx-2003-27) (``Phlx Five-Day 
Notice'') (notice of filing and immediate effectiveness of proposed 
rule change relating to the amendment of price criteria for certain 
securities that underlie options traded on the Exchange). See also 
Securities Exchange Act Release No. 46957 (December 6, 2002), 67 FR 
77106 (December 16, 2002) (SR-CBOE-2002-62).
    \17\ Phlx Five-Day Notice at 25078.
    \18\ Id.
    \19\ The Chicago Board Options Exchange was the first exchange 
to propose the $3 per share closing market price requirement and the 
five-day ``look back'' period. See Securities Exchange Act Release 
No. 47190 (January 15, 2003), 68 FR 3072, 3072-73 (January 22, 2003) 
(SR-CBOE-2002-62) (order approving proposed rule change to amend 
CBOE rule which establishes the pricing criteria for securities that 
underlie options traded on the Exchange).
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    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 email to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2011-143 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2011-143. This file 
number should be included on the subject line if email 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

[[Page 70523]]

communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for Web site viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE., Washington, DC 20549, on official 
business days between the hours of 10 a.m. and 3 p.m. Copies of the 
filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-Phlx-2011-143 and should be submitted on or before 
December 5, 2011.


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-29300 Filed 11-10-11; 8:45 am]
BILLING CODE 8011-01-P
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