[Federal Register Volume 75, Number 205 (Monday, October 25, 2010)]
[Notices]
[Pages 65541-65542]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-26827]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63132; File No. SR-Phlx-2010-118]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change by NASDAQ OMX PHLX, Inc. To Expand the $.50 Strike Price Program
October 19, 2010.
On August 25, 2010, NASDAQ OMX PHLX, Inc. (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities
Exchange Act of 1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ a
proposed rule change to expand the Exchange's $.50 Strike Price Program
(``$0.50 Strike Program'' or ``Program''). The proposed rule change was
published for comment in the Federal Register on September 8, 2010.\4\
There were no comments on the proposed rule change. This order approves
the proposed rule change.
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\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ See Securities Exchange Act Release No. 62799 (August 25,
2010), 75 FR 54662 (``Notice'').
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The Exchange proposes to amend Commentary .05 to Exchange Rule
1012, Series of Options Open for Trading,
[[Page 65542]]
regarding the $.50 Strike Program to: (i) Expand the permitted price
range of the $.50 Strike Program from $1.00-$3.50 to $0.50-$5.50; (ii)
raise the threshold of the previous day's closing price of the
underlying security from $3.00 to $5.00; and (iii) expand the number of
options classes permitted under the Program from 5 to 20.
Currently, Commentary .05 to Exchange Rule 1012 permits strike
price intervals of $.50 or greater beginning at $1.00 where the strike
price is $3.50 or less, but only for option classes whose underlying
security closed at or below $3.00 in its primary market on the previous
trading day and which have national average daily volume that equals or
exceeds 1000 contracts per day as determined by The Options Clearing
Corporation during the preceding three calendar months. Further, the
listing of $.50 strike prices is limited to options classes overlying
no more than 5 individual stocks as specifically designated by the
Exchange. The Exchange is currently restricted from listing series with
$1 intervals within $0.50 of an existing strike price in the same
series, except that strike prices of $2, $3, and $4 shall be permitted
within $0.50 of an existing strike price for classes also selected to
participate in both the $0.50 Strike Program and the $1 Strike
Program.\5\
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\5\ See Exchange Rule 1012, Commentary .05(a)(i)(B) referring to
the $1 Strike Program.
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The Exchange also proposes a corresponding amendment to Commentary
.05(a)(i)(B) of Exchange Rule 1012 to add $5 to the list of strike
prices permitted within $0.50 of an existing strike price in the same
series for classes selected for both programs.
In its filing with the Commission, the Exchange stated that the
number of $.50 strike options traded on the Exchange has continued to
increase since the inception of the Program. The Exchange stated that
the proposal would expand $.50 strike offerings to market participants
and thereby should enhance their ability to tailor investing and
hedging strategies and opportunities in a volatile marketplace. The
Exchange further stated that it believes an expansion of the $.50
Strike Program would allow investors to better enhance returns and
manage risk by providing them with significantly greater flexibility in
the trading of equity options that overlie lower price stocks by
allowing them to establish equity options positions that are better
tailored to meet their investment, trading and risk. In addition, the
Exchange represented that $0.50 strikes have had no impact on capacity.
After careful review, the Commission finds that the proposed rule
change is consistent with the Act and the rules and regulations
thereunder applicable to a national securities exchange.\6\ In
particular, the Commission believes that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\7\ which requires, among
other things, that the rules of a national securities exchange be
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.
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\6\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
\7\ 15 U.S.C. 78f(b).
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Specifically, the Commission believes that the proposal to expand
the $.50 Strike Program should provide investors with added flexibility
in the trading of equity options and further the public interest by
allowing investors to establish equity options positions that are
better tailored to meet their investment objectives. The Commission
also believes that the proposal strikes a reasonable balance between
the Exchange's desire to accommodate market participants by offering a
wider array of investment opportunities and the need to avoid
unnecessary proliferation of options series and the corresponding
increase in quotes. The Commission expects that the Exchange will
monitor the trading volume associated with the additional options
series listed as a result of this proposal and the effect of these
additional series on market fragmentation and on the capacity of the
Exchange's, OPRA's and vendors' automated systems.
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (SR-Phlx-2010-118) be, and it
hereby is, approved.
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\8\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-26827 Filed 10-22-10; 8:45 am]
BILLING CODE 8011-01-P