Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To List and Trade Option Contracts Overlying 10 Shares of Certain Securities, 66904-66907 [2012-27131]
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66904
Federal Register / Vol. 77, No. 216 / Wednesday, November 7, 2012 / Notices
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
pmangrum on DSK3VPTVN1PROD with NOTICES
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–NYSEMKT–2012–56 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–NYSEMKT–2012–56. 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
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 on official business
days between the hours of 10:00 a.m.
and 3:00 p.m. Copies of such filing also
will be available for inspection and
copying at the NYSE’s principal office
and on its Internet Web site at
www.nyse.com. 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
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available publicly. All submissions
should refer to File Number SR–
NYSEMKT–2012–56, and should be
submitted on or before November 28,
2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–27222 Filed 11–6–12; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–68132; File No. SR-Phlx2012–126]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To List and
Trade Option Contracts Overlying 10
Shares of Certain Securities
November 1, 2012.
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 October
19, 2012, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) 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
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade option contracts overlying 10
shares of a security (‘‘Mini Options’’).
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
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
Frm 00112
Fmt 4703
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
PO 00000
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.
Sfmt 4703
The purpose of the proposed rule
change is to amend Rule 1001 (Position
Limits), Rule 1012 (Series of Options
Open for Trading) and 1033 (Bids and
Offers—Premium) to list and trade Mini
Options overlying five (5) high-priced
securities for which the standard
contract overlying the same security
exhibits significant liquidity.
Specifically, the Exchange proposes to
list Mini Options on SPDR S&P 500
(‘‘SPY’’), Apple, Inc. (‘‘AAPL’’), SPDR
Gold Trust (‘‘GLD’’), Google Inc.
(‘‘GOOG’’) and Amazon.com Inc.
(‘‘AMZN’’).3 The Exchange believes that
this proposal would allow investors to
select among options on various highpriced and actively traded securities,
each with a unit of trading ten times
lower than those of the regular-sized
options contracts, or 10 shares.
For example, with Apple Inc.
(‘‘AAPL’’) trading at $605.85 on March
21, 2012, ($60,585 for 100 shares
underlying a standard contract), the 605
level call expiring on March 23 was
trading at $7.65. The cost of the
standard contract overlying 100 shares
would be $765, which is substantially
higher in notional terms than the
average equity option price of $250.89.4
Proportionately equivalent mini-options
contracts on AAPL would provide
investors with the ability to manage and
hedge their portfolio risk on their
underlying investment, at a price of
$76.50 per contract. In addition,
investors who hold a position in AAPL
at less than the round lot size would
still be able to avail themselves of
3 These issues were selected because they are
priced greater than $100 and are among the most
actively traded issues, in that the standard contract
exhibits average daily volume (‘‘ADV’’) over the
previous three calendar months of at least 45,000
contracts, excluding LEAPS and FLEX series. The
Exchange notes that any expansion of the program
would require that a subsequent proposed rule
change be submitted to the Commission.
4 A high priced underlying security may have
relatively expensive options, because a low
percentage move in the share price may mean a
large movement in the options in terms of absolute
dollars. Average non-FLEX equity option premium
per contract January 1–December 31, 2011. See
https://www.theocc.com/webapps/monthly-volumereports?reportClass=equity.
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Federal Register / Vol. 77, No. 216 / Wednesday, November 7, 2012 / Notices
options to manage their portfolio risk.
For example, the holder of 50 shares of
AAPL could write covered calls for five
mini-options contracts. The table below
demonstrates the proposed differences
between a mini-options contract and a
66905
standard contract with a strike price of
$125 per share and a bid or offer of
$3.20 per share:
Standard
Share Deliverable Upon Exercise .......................................................................................................................................
Strike Price ..........................................................................................................................................................................
Bid/Offer ...............................................................................................................................................................................
Premium Multiplier ...............................................................................................................................................................
Total Value of Deliverable ...................................................................................................................................................
Total Value of Contract ........................................................................................................................................................
pmangrum on DSK3VPTVN1PROD with NOTICES
The Exchange currently lists and
trades standardized option contracts on
a number of equities and ExchangeTraded Funds (‘‘ETFs’’) each with a unit
of trading of 100 shares. Except for the
difference in the number of deliverable
shares, the proposed Mini Options
would have the same terms and contract
characteristics as regular-sized equity
and ETF options, including exercise
style. All existing Exchange rules
applicable to options on equities and
ETFs would apply to Mini Options,
except with respect to position and
exercise limits and hedge exemptions to
those position limits, which would be
tailored for the smaller size. Pursuant to
proposed amendments to Rule 1001,
position limits applicable to a regularsized option contract would also apply
to the Mini Options on the same
underlying security, with 10 Mini
Option contracts counting as one
regular-sized contract. Positions in both
the regular-sized option contract and
Mini Options on the same security will
be combined for purposes of calculating
positions. Further, hedge exemptions
will apply pursuant to Rule 1001,
Commentary .07, which the Exchange
proposes to revise to provide that 10 (as
opposed to 100) shares of the
underlying security is the appropriate
hedge for Mini Options and to make
clear that the hedge exemptions apply to
the position limits set forth in Rule
1001(a) and Rule 1001, Commentary
.02(i).5
Also, of note, NYSE Arca, Inc.
(‘‘NYSE Arca’’) lists and trades option
contracts overlying a number of shares
other than 100.6 Moreover, the concept
of listing and trading parallel options
5 Phlx Rule 1002, Exercise Limits, refers to
exercise limits that correspond to aggregate long
positions as described in Phlx Rule 1001. Today,
the position limits established in a given option
under Rule 1001 is also the exercise limit for such
option. Thus, although the proposed rule change
would not amend the text of Rule 1002 (Exercise
Limits) itself, the proposed amendment to Rule
1001 (Position Limits) would have a corresponding
effect on the exercise limits.
6 See Securities Exchange Act Release No. 44025
(February 28, 2001), 66 FR 13986 (March 8, 2001)
(approving SR–PCX–01–12).
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products of reduced values and sizes on
the same underlying security is not
novel. For example, parallel product
pairs on a full-value and reduced-value
basis are currently listed on the S&P 500
Index (‘‘SPX’’ and ‘‘XSP,’’ respectively),
the Nasdaq 100 Index (‘‘NDX’’ and
‘‘MNX,’’ respectively) and the Russell
2000 Index (‘‘RUT’’ and ‘‘RMN,’’
respectively).
The Exchange believes that the
proposal to list Mini Options will not
lead to investor confusion. There are
two important distinctions between
Mini Options and regular-sized options
that are designed to ease the likelihood
of any investor confusion. First, the
premium multiplier for the proposed
Mini Options will be 10, rather than
100, to reflect the smaller unit of
trading. To reflect this change, the
Exchange proposes to add Rule
1033(b)(iii) which notes that bids and
offers for an option contract overlying
10 shares would be expressed in terms
of dollars per 1/10th part of the total
value of the contract. Thus, an offer of
‘‘.50’’ shall represent an offer of $5.00
on an option contract having a unit of
trading consisting of 10 shares. Second,
the Exchange intends to designate Mini
Options with different trading symbols
than those designated for the regularsized contracts. For example, while the
trading symbol for regular option
contracts for Apple, Inc. is AAPL, the
Exchange proposes to adopt AAPL7 as
the trading symbol for Mini Options on
that same security.
The Exchange proposes to add a
Commentary .13 to Rule 1012 to reflect
that strike prices for Mini Options shall
be set at the same level as for regular
options. For example, a call series strike
price to deliver 10 shares of stock at
$125 per share has a total deliverable
value of $1,250, and the strike price will
be set at 125. Further, pursuant to
proposed new Commentary .13 to Rule
1012, the Exchange proposes to not
permit the listing of additional series of
Mini Options if the underlying is
trading at $90 or less to limit the
number of strikes once the underlying is
no longer a high priced security. The
PO 00000
Frm 00113
Fmt 4703
Sfmt 4703
Mini
100 shares
125 ..........
3.20 ..........
$100 .........
$12,500 ...
$320 ........
10 shares
125
3.20
$10
$1,250
$32
Exchange proposes a $90.01 minimum
for continued qualification so that
additional series of Mini Options that
correspond to standard strikes may be
added even though the underlying has
fallen slightly below the initial
qualification standard. In addition, the
underlying security must be trading
above $90 for five consecutive days
before the listing of Mini Option
contracts in a new expiration month.
This restriction will allow the Exchange
to list strikes in Mini Options without
disruption when a new expiration
month is added even if the underlying
has had a minor decline in price. The
same trading rules applicable to existing
equity and ETF options would apply,
including Market Maker obligations, to
Mini Options.7
The Exchange notes that by listing the
same strike price for Mini Options as for
regular options, the Exchange seeks to
keep intact the long-standing
relationship between the underlying
security and an option strike price thus
allowing investors to intuitively grasp
the option’s value, i.e., option is in the
money, at the money or out of the
money. The Exchange believes that by
not changing anything but the
multiplier and the option symbol, as
discussed above, retail investors will be
able to grasp the distinction between
regular option contracts and Mini
Options. The Exchange notes that The
Options Clearing Corporation (‘‘the
OCC’’) Symbology is structured for
contracts that have a deliverable of other
than 100 shares to be designated with a
numeric added to the standard trading
symbol. Further, the Exchange believes
that the contract characteristics of Mini
Options are consistent with the terms of
the Options Disclosure Document.
With regard to the impact of this
proposal on system capacity, the
Exchange has analyzed its capacity and
represents that it and the Options Price
Reporting Authority (‘‘OPRA’’) have the
necessary systems capacity to handle
the potential additional traffic
associated with the listing and trading
7 See
E:\FR\FM\07NON1.SGM
Rule 1014.
07NON1
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Federal Register / Vol. 77, No. 216 / Wednesday, November 7, 2012 / Notices
pmangrum on DSK3VPTVN1PROD with NOTICES
of Mini Options. The Exchange has
further discussed the proposed listing
and trading of Mini Options with the
OCC, which has represented that it is
able to accommodate the proposal. In
addition, the Exchange would file a
proposed rule change to adopt
transaction fees specific to Mini
Options. The Exchange notes that the
current Pricing Schedule will not apply
to the trading of mini-options contracts.
The Exchange will not commence
trading of mini-option contracts until
specific fees for mini-options contracts
trading have been filed with the
Commission.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the
Securities and Exchange Act of 1934
(‘‘Exchange Act’’),8 in general, and with
Section 6(b)(5) of the Exchange Act,9 in
particular, in that the proposal is
designed to prevent fraudulent and
manipulative acts and practices, 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.
The Exchange believes that investors
would benefit from the introduction and
availability of Mini Options by making
options on high priced securities more
readily available as an investing tool at
more affordable prices, particularly for
average retail investors, who otherwise
may not be able to participate in trading
options on high priced securities. The
Exchange intends to adopt a different
trading symbol to distinguish Mini
Options from its currently listed option
contracts and therefore, eliminate
investor confusion with respect to
product distinction. Moreover, the
proposed rule change is designed to
protect investors and the public interest
by providing investors with an
enhanced tool to reduce risk in high
priced securities. In particular, Mini
Options would provide retail customers
who invest in SPY, AAPL, GLD, GOOG
and AMZN in lots of less than 100
shares with a means of protecting their
investments that is currently only
available to those who have positions of
100 shares or more. Further, the
proposed rule change is limited to just
five high priced securities to ensure that
only securities that have significant
options liquidity and therefore,
customer demand, are selected to have
Mini Options listed on them.
8 15
9 15
U.S.C. 78f.
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. To the
contrary, the Exchange believes that
offering these products on Phlx similar
to other exchanges will provide
investors with various venues in which
to trade Mini Options.
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: (1) Does not significantly affect
the protection of investors or the public
interest; (2) does not impose any
significant burden on competition; and
(3) by its terms does not become
operative for 30 days after the date of
this filing, or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest, the proposed rule
change has become effective pursuant to
Section 19(b)(3)(A) of the Act 10 and
Rule 19b–4(f)(6) thereunder.11
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative for 30 days after the
date of filing. However, Rule 19b–
4(f)(6)(iii) permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange requests that the Commission
waive the 30-day operative delay so that
it can list and trade the proposed mini
options as soon as it is able.12 The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest.13 The Commission notes
10 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
provide the Commission with written notice of its
intent to file the proposed rule change, along with
a brief description and text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission. The
Exchange has fulfilled this requirement.
12 The Commission notes that the Exchange’s
current Pricing Schedule will not apply to the
trading of mini-options contracts, and the Exchange
will not commence trading of mini-option contracts
until specific fees for mini-options contracts trading
have been filed with the Commission.
13 For purposes only of waiving the 30-day
operative delay, the Commission has also
11 17
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Fmt 4703
Sfmt 4703
the proposal is substantively identical to
a proposal that was recently approved
by the Commission, and does not raise
any new regulatory issues.14 For these
reasons, the Commission designates the
proposed rule change as operative upon
filing.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–Phlx–2012–126 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–2012–126. 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
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
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
14 See Securities Exchange Act Release No. 67948
(September 28, 2012), 77 FR 60735 (October 4,
2012) (SR–NYSEArca–2012–64 and SR–ISE–2012–
58).
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Federal Register / Vol. 77, No. 216 / Wednesday, November 7, 2012 / Notices
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
10:00 a.m. and 3:00 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–
2012–126 and should be submitted on
or before November 28, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–27131 Filed 11–6–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68129; File No. SR–
NASDAQ–2012–120]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Modify the
Annual Fees for Companies Listed on
the Nasdaq Capital Market
November 1, 2012.
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 October
18, 2012, The NASDAQ Stock Market
LLC (‘‘NASDAQ’’ or the ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) a
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.
pmangrum on DSK3VPTVN1PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASDAQ is proposing a change to
modify the annual fees for companies
listed on the Nasdaq Capital Market.
The text of the proposed rule change
is below. Proposed new language is in
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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italics; proposed deletions are in
[brackets].
5920. The Nasdaq Capital Market
(a)–(b) No change.
(c) Annual Fee
(1)
(A) The issuer of each class of
securities that is a domestic or foreign
issue, other than American Depositary
Receipts (ADRs), listed on the Nasdaq
Capital Market shall pay to Nasdaq an
annual fee in the amount of [$27,500]
$32,000.
(B) [The] Effective January 1, 2013,
the issuer of each class of securities that
is an ADR listed on [The] the Nasdaq
Capital Market shall pay to Nasdaq an
annual fee in the amount of $25,000.
Effective January 1, 2014, the issuer of
each class of securities that is an ADR
listed on the Nasdaq Capital Market
shall pay to Nasdaq an annual fee in the
amount of $32,000. [calculated on ADRs
outstanding according to the following
schedule:
Up to 10 million ADRs $17,500
Over 10 million ADRs $21,000]
(2)–(8) No change.
(d)–(e) No change.
*
*
*
*
*
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
self-regulatory organization 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 those 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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Nasdaq proposes to modify the annual
fee charged to companies that list
securities on the Nasdaq Capital Market
(‘‘Capital Market’’), effective January 1,
2013. Currently, the annual fee for
securities other than American
Depositary Receipts (‘‘ADRs’’) is
$27,500. Nasdaq proposes to increase
this fee to $32,000. This fee was last
changed in 2007.
In addition, the annual fee charged for
ADRs is currently tiered, based on the
number of ADRs outstanding. Issuers
with 10 million or fewer ADRs
PO 00000
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Sfmt 4703
66907
outstanding pay an annual fee of
$17,500, while issuers with more than
10 million ADRs outstanding pay an
annual fee of $21,000. Nasdaq has
determined that companies that list
ADRs on the Capital Market should be
charged the same fee as other
companies. However, given that these
companies currently pay lower annual
fees than other companies, Nasdaq
proposes to reduce the impact of this
change by phasing in the increase over
two years. Specifically, Nasdaq
proposes that effective January 1, 2013,
the annual fee for ADRs will be $25,000
and effective January 1, 2014, the
annual fee for ADRs will be $32,000.
Companies currently listed on the
Capital Market have already paid their
2012 annual fee. However, any company
that lists prior to December 31, 2012
will owe a prorated annual fee based on
the existing $27,500 fee schedule or the
existing tiered structure applicable to
ADRs. The new fees will become
effective on January 1, 2013, and
companies will be billed their 2013
annual fee based on the new fee
schedule shortly thereafter.3
2. Statutory Basis
Nasdaq believes that the proposed
rule change is consistent with the
provisions of Section 6 of the Act,4 in
general and with Section 6(b)(4) of the
Act,5 in particular in that it provides for
the equitable allocation of reasonable
dues, fees, and other charges among its
members, issuers and other persons
using its facilities and does not unfairly
discriminate between customers,
issuers, brokers or dealers.6
Nasdaq believes that the proposed
increase in the annual fee for companies
listing on the Capital Market is
reasonable because the revised fee will
better reflect Nasdaq’s costs related to
companies listed on the Capital Market
and the value that such a listing
provides to the company. In that regard,
Nasdaq notes that it has not increased
the annual fees for listing on the Capital
Market since January 1, 2007,7 but has
3 Until January 1, 2013, the online Nasdaq rule
book will reflect the currently effective fees with a
note indicating that this fee change is pending and
will become effective on January 1, 2013. The
online Nasdaq rule book will also contain a link to
the text of the revised rule.
4 15 U.S.C. 78f.
5 15 U.S.C. 78f(b)(4).
6 The Commission notes that Section 6(b)(5) of
the Act contains the provision that states rules of
an exchange ‘‘are not designed to permit unfair
discrimination between customers, issuers, brokers,
or dealers.’’ See 15 U.S.C. 78f(b)(5).
7 Securities Exchange Act Release No. 55202
(January 30, 2007), 72 FR 6017 (February 8, 2007)
(approving SR–NASDAQ–2006–040). The annual
fees for ADRs have not been changed since 2005.
E:\FR\FM\07NON1.SGM
Continued
07NON1
]]>Agencies
[Federal Register Volume 77, Number 216 (Wednesday, November 7, 2012)]
[Notices]
[Pages 66904-66907]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-27131]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68132; File No. SR-Phlx-2012-126]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To List and
Trade Option Contracts Overlying 10 Shares of Certain Securities
November 1, 2012.
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 October 19, 2012, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'')
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 by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade option contracts overlying
10 shares of a security (``Mini Options'').
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 Rule 1001
(Position Limits), Rule 1012 (Series of Options Open for Trading) and
1033 (Bids and Offers--Premium) to list and trade Mini Options
overlying five (5) high-priced securities for which the standard
contract overlying the same security exhibits significant liquidity.
Specifically, the Exchange proposes to list Mini Options on SPDR S&P
500 (``SPY''), Apple, Inc. (``AAPL''), SPDR Gold Trust (``GLD''),
Google Inc. (``GOOG'') and Amazon.com Inc. (``AMZN'').\3\ The Exchange
believes that this proposal would allow investors to select among
options on various high-priced and actively traded securities, each
with a unit of trading ten times lower than those of the regular-sized
options contracts, or 10 shares.
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\3\ These issues were selected because they are priced greater
than $100 and are among the most actively traded issues, in that the
standard contract exhibits average daily volume (``ADV'') over the
previous three calendar months of at least 45,000 contracts,
excluding LEAPS and FLEX series. The Exchange notes that any
expansion of the program would require that a subsequent proposed
rule change be submitted to the Commission.
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For example, with Apple Inc. (``AAPL'') trading at $605.85 on March
21, 2012, ($60,585 for 100 shares underlying a standard contract), the
605 level call expiring on March 23 was trading at $7.65. The cost of
the standard contract overlying 100 shares would be $765, which is
substantially higher in notional terms than the average equity option
price of $250.89.\4\ Proportionately equivalent mini-options contracts
on AAPL would provide investors with the ability to manage and hedge
their portfolio risk on their underlying investment, at a price of
$76.50 per contract. In addition, investors who hold a position in AAPL
at less than the round lot size would still be able to avail themselves
of
[[Page 66905]]
options to manage their portfolio risk. For example, the holder of 50
shares of AAPL could write covered calls for five mini-options
contracts. The table below demonstrates the proposed differences
between a mini-options contract and a standard contract with a strike
price of $125 per share and a bid or offer of $3.20 per share:
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\4\ A high priced underlying security may have relatively
expensive options, because a low percentage move in the share price
may mean a large movement in the options in terms of absolute
dollars. Average non-FLEX equity option premium per contract January
1-December 31, 2011. See https://www.theocc.com/webapps/monthly-volume-reports?reportClass=equity.
------------------------------------------------------------------------
Standard Mini
------------------------------------------------------------------------
Share Deliverable Upon Exercise.. 100 shares........ 10 shares
Strike Price..................... 125............... 125
Bid/Offer........................ 3.20.............. 3.20
Premium Multiplier............... $100.............. $10
Total Value of Deliverable....... $12,500........... $1,250
Total Value of Contract.......... $320.............. $32
------------------------------------------------------------------------
The Exchange currently lists and trades standardized option
contracts on a number of equities and Exchange-Traded Funds (``ETFs'')
each with a unit of trading of 100 shares. Except for the difference in
the number of deliverable shares, the proposed Mini Options would have
the same terms and contract characteristics as regular-sized equity and
ETF options, including exercise style. All existing Exchange rules
applicable to options on equities and ETFs would apply to Mini Options,
except with respect to position and exercise limits and hedge
exemptions to those position limits, which would be tailored for the
smaller size. Pursuant to proposed amendments to Rule 1001, position
limits applicable to a regular-sized option contract would also apply
to the Mini Options on the same underlying security, with 10 Mini
Option contracts counting as one regular-sized contract. Positions in
both the regular-sized option contract and Mini Options on the same
security will be combined for purposes of calculating positions.
Further, hedge exemptions will apply pursuant to Rule 1001, Commentary
.07, which the Exchange proposes to revise to provide that 10 (as
opposed to 100) shares of the underlying security is the appropriate
hedge for Mini Options and to make clear that the hedge exemptions
apply to the position limits set forth in Rule 1001(a) and Rule 1001,
Commentary .02(i).\5\
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\5\ Phlx Rule 1002, Exercise Limits, refers to exercise limits
that correspond to aggregate long positions as described in Phlx
Rule 1001. Today, the position limits established in a given option
under Rule 1001 is also the exercise limit for such option. Thus,
although the proposed rule change would not amend the text of Rule
1002 (Exercise Limits) itself, the proposed amendment to Rule 1001
(Position Limits) would have a corresponding effect on the exercise
limits.
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Also, of note, NYSE Arca, Inc. (``NYSE Arca'') lists and trades
option contracts overlying a number of shares other than 100.\6\
Moreover, the concept of listing and trading parallel options products
of reduced values and sizes on the same underlying security is not
novel. For example, parallel product pairs on a full-value and reduced-
value basis are currently listed on the S&P 500 Index (``SPX'' and
``XSP,'' respectively), the Nasdaq 100 Index (``NDX'' and ``MNX,''
respectively) and the Russell 2000 Index (``RUT'' and ``RMN,''
respectively).
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\6\ See Securities Exchange Act Release No. 44025 (February 28,
2001), 66 FR 13986 (March 8, 2001) (approving SR-PCX-01-12).
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The Exchange believes that the proposal to list Mini Options will
not lead to investor confusion. There are two important distinctions
between Mini Options and regular-sized options that are designed to
ease the likelihood of any investor confusion. First, the premium
multiplier for the proposed Mini Options will be 10, rather than 100,
to reflect the smaller unit of trading. To reflect this change, the
Exchange proposes to add Rule 1033(b)(iii) which notes that bids and
offers for an option contract overlying 10 shares would be expressed in
terms of dollars per 1/10th part of the total value of the contract.
Thus, an offer of ``.50'' shall represent an offer of $5.00 on an
option contract having a unit of trading consisting of 10 shares.
Second, the Exchange intends to designate Mini Options with different
trading symbols than those designated for the regular-sized contracts.
For example, while the trading symbol for regular option contracts for
Apple, Inc. is AAPL, the Exchange proposes to adopt AAPL7 as the
trading symbol for Mini Options on that same security.
The Exchange proposes to add a Commentary .13 to Rule 1012 to
reflect that strike prices for Mini Options shall be set at the same
level as for regular options. For example, a call series strike price
to deliver 10 shares of stock at $125 per share has a total deliverable
value of $1,250, and the strike price will be set at 125. Further,
pursuant to proposed new Commentary .13 to Rule 1012, the Exchange
proposes to not permit the listing of additional series of Mini Options
if the underlying is trading at $90 or less to limit the number of
strikes once the underlying is no longer a high priced security. The
Exchange proposes a $90.01 minimum for continued qualification so that
additional series of Mini Options that correspond to standard strikes
may be added even though the underlying has fallen slightly below the
initial qualification standard. In addition, the underlying security
must be trading above $90 for five consecutive days before the listing
of Mini Option contracts in a new expiration month. This restriction
will allow the Exchange to list strikes in Mini Options without
disruption when a new expiration month is added even if the underlying
has had a minor decline in price. The same trading rules applicable to
existing equity and ETF options would apply, including Market Maker
obligations, to Mini Options.\7\
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\7\ See Rule 1014.
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The Exchange notes that by listing the same strike price for Mini
Options as for regular options, the Exchange seeks to keep intact the
long-standing relationship between the underlying security and an
option strike price thus allowing investors to intuitively grasp the
option's value, i.e., option is in the money, at the money or out of
the money. The Exchange believes that by not changing anything but the
multiplier and the option symbol, as discussed above, retail investors
will be able to grasp the distinction between regular option contracts
and Mini Options. The Exchange notes that The Options Clearing
Corporation (``the OCC'') Symbology is structured for contracts that
have a deliverable of other than 100 shares to be designated with a
numeric added to the standard trading symbol. Further, the Exchange
believes that the contract characteristics of Mini Options are
consistent with the terms of the Options Disclosure Document.
With regard to the impact of this proposal on system capacity, the
Exchange has analyzed its capacity and represents that it and the
Options Price Reporting Authority (``OPRA'') have the necessary systems
capacity to handle the potential additional traffic associated with the
listing and trading
[[Page 66906]]
of Mini Options. The Exchange has further discussed the proposed
listing and trading of Mini Options with the OCC, which has represented
that it is able to accommodate the proposal. In addition, the Exchange
would file a proposed rule change to adopt transaction fees specific to
Mini Options. The Exchange notes that the current Pricing Schedule will
not apply to the trading of mini-options contracts. The Exchange will
not commence trading of mini-option contracts until specific fees for
mini-options contracts trading have been filed with the Commission.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Securities and Exchange Act of
1934 (``Exchange Act''),\8\ in general, and with Section 6(b)(5) of the
Exchange Act,\9\ in particular, in that the proposal is designed to
prevent fraudulent and manipulative acts and practices, 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.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that investors would benefit from the
introduction and availability of Mini Options by making options on high
priced securities more readily available as an investing tool at more
affordable prices, particularly for average retail investors, who
otherwise may not be able to participate in trading options on high
priced securities. The Exchange intends to adopt a different trading
symbol to distinguish Mini Options from its currently listed option
contracts and therefore, eliminate investor confusion with respect to
product distinction. Moreover, the proposed rule change is designed to
protect investors and the public interest by providing investors with
an enhanced tool to reduce risk in high priced securities. In
particular, Mini Options would provide retail customers who invest in
SPY, AAPL, GLD, GOOG and AMZN in lots of less than 100 shares with a
means of protecting their investments that is currently only available
to those who have positions of 100 shares or more. Further, the
proposed rule change is limited to just five high priced securities to
ensure that only securities that have significant options liquidity and
therefore, customer demand, are selected to have Mini Options listed on
them.
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. To the contrary, the Exchange
believes that offering these products on Phlx similar to other
exchanges will provide investors with various venues in which to trade
Mini Options.
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: (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) by its terms does not become operative for 30 days after the
date of this filing, or such shorter time as the Commission may
designate if consistent with the protection of investors and the public
interest, the proposed rule change has become effective pursuant to
Section 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6)
thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to provide the Commission
with written notice of its intent to file the proposed rule change,
along with a brief description and text of the proposed rule change,
at least five business days prior to the date of filing of the
proposed rule change, or such shorter time as designated by the
Commission. The Exchange has fulfilled this requirement.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing. However,
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest. The Exchange requests that the Commission waive
the 30-day operative delay so that it can list and trade the proposed
mini options as soon as it is able.\12\ The Commission believes that
waiving the 30-day operative delay is consistent with the protection of
investors and the public interest.\13\ The Commission notes the
proposal is substantively identical to a proposal that was recently
approved by the Commission, and does not raise any new regulatory
issues.\14\ For these reasons, the Commission designates the proposed
rule change as operative upon filing.
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\12\ The Commission notes that the Exchange's current Pricing
Schedule will not apply to the trading of mini-options contracts,
and the Exchange will not commence trading of mini-option contracts
until specific fees for mini-options contracts trading have been
filed with the Commission.
\13\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\14\ See Securities Exchange Act Release No. 67948 (September
28, 2012), 77 FR 60735 (October 4, 2012) (SR-NYSEArca-2012-64 and
SR-ISE-2012-58).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-Phlx-2012-126 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-2012-126. 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 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
[[Page 66907]]
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 10:00 a.m. and 3:00 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-2012-126 and should be submitted on or before
November 28, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-27131 Filed 11-6-12; 8:45 am]
BILLING CODE 8011-01-P
