[Federal Register Volume 75, Number 54 (Monday, March 22, 2010)]
[Notices]
[Pages 13614-13616]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-6113]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61695; File No. SR-Phlx-2010-40]
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of
Filing of Proposed Rule Change To Establish Strike Price Intervals and
Trading Hours for Options on Index-Linked Securities
March 12, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on March 1, 2010, NASDAQ OMX PHLX, Inc. (``Phlx''
or ``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by 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 is filing with the Commission a proposal to amend:
Phlx Rule 1012 (Series of Options Open for Trading) to establish
strike-price intervals for options on Index-Linked Securities; \3\ and
Phlx Rule 101 (Hours of Business) to establish trading hours for these
products. The text of the proposed rule change is available on Phlx's
Web site at http://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLX/Filings/, on the Commission's Web site at http://www.sec.gov, at Phlx,
and at the Commission's Public Reference Room.
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\3\ Index-Linked Securities, also known as exchange-traded
notes, are long-term notes that are the non-convertible debt of an
issuer with a term of at least one year but not greater than thirty
years. These exchange-traded securities are designed for investors
who desire to participate in a specific market segment by providing
exposure to one or more identifiable underlying securities,
commodities, currencies, derivative instruments or market indexes.
The Exchange's listing standards for options on Index-Linked
Securities were established in September 2008. See Securities
Exchange Act Release No. 58571 (September 17, 2008), 73 FR 55188
(September 24, 2008) (SR-Phlx-2008-60) (notice of filing and
immediate effectiveness). Other exchanges have established similar
listing standards. See Securities Exchange Act Release Nos. 59923
(May 14, 2009), 74 FR 23902 (May 21, 2009) (SR-NASDAQ-2009-046)
(notice of filing and immediate effectiveness); 58204 (July 22,
2008), 73 FR 43807 (July 28, 2008) (SR-CBOE-2008-64) (approval
order); 58203 (July 22, 2008), 73 FR 43812 (July 28, 2008) (SR-
NYSEArca-2008-57) (approval order); and 58985 (November 20, 2008),
73 FR 72538 (November 28, 2008) (SR-ISE-2008-86) (notice of filing
and immediate effectiveness).
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the 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
The purpose of this proposal is to amend Rules 1012 and 101 to
establish
[[Page 13615]]
strike price intervals and trading hours for options on Index-Linked
Securities (``ILS''), also known as exchange-traded notes (``ETN''),
prior to the Exchange proposing to list and trade these new products.
The Commission has approved the Exchange's proposal, as well as the
proposals of other options exchanges, to enable the listing and trading
of options on ILS (ETN).\4\ Options trading has not commenced to date
and is contingent upon the Commission's approval of The Options
Clearing Corporation's (``OCC'') proposed supplement to the Options
Disclosure Document (``ODD'') that will provide disclosure regarding
options on Index-Linked Securities.\5\
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\4\ See supra note 3.
\5\ OCC previously received Commission approval to clear options
based on Index-Linked Securities. See Securities Exchange Act
Release No. 60872 (October 23, 2009), 74 FR 55878 (October 29, 2009)
(SR-OCC-2009-14) (approval order).
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$1 Strikes for ILS (ETN) Options
Prior to the commencement of trading options on Index-Linked
Securities, the Exchange is proposing to establish that strike price
intervals of $1 will be permitted where the strike price is less than
$200. Where the strike price is greater than $200, $5 strikes will be
permitted. These proposed changes are reflected by the addition of
Commentary .05(a)(v) to Rule 1012.
The Exchange is seeking to establish $1 strikes for ILS (ETN)
options where the strike price is less than $200 because the Exchange
believes the marketplace and investors will be expecting these types of
options to trade in a similar manner to options on exchange-traded
funds (``ETFs''). Strike prices for ETF options are permitted in $1 or
greater intervals where the strike price is $200 or less and $5 or
greater where the strike price is greater than $200.\6\ Accordingly,
the Exchange believes that the rationale for permitting $1 strikes for
ETF options equally applies to permitting $1 strikes for ILS (ETN)
options, and that investors will be better served if $1 strike price
intervals are available for ILS (ETN) options where the strike price is
less than $200. The Exchange believes that $1 strike price intervals
for options on Index-Linked Securities will provide investors with
greater flexibility by allowing them to establish positions that are
better tailored to meet their investment objectives.
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\6\ See proposed Commentary .05(a)(iv) of Rule 1012, which is
renumbered for internal consistency.
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Trading Hours for ILS (ETN) Options
The Exchange proposes to amend Supplementary Material .01 to Rule
101 to provide that options on exchange-traded notes including Index-
Linked Securities may be traded on the Exchange until 4:15 p.m. each
business day. This will establish similar trading hours for ILS (ETN)
options as the currently-established trading hours for ETF options.\7\
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\7\ See Rule 101.
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The Exchange has analyzed its capacity and believes the Exchange
and the Options Price Reporting Authority (``OPRA'') have the necessary
systems capacity to handle the additional traffic associated with the
listing and trading of $1 strikes where the strike price is less than
$200 for ILS (ETN) options.
The Exchange expects that other option exchanges that have adopted
rules providing for the listing and trading of options on Index-Linked
Securities will submit similar proposals.\8\
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\8\ See, for example, Securities Exchange Act Release No. 61466
(February 2, 2010), 75 FR 6243 (February 8, 2010) (SR-CBOE-2010-005)
(notice of filing).
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \9\ in general, and furthers the objectives of Section
6(b)(5) of the Act \10\ in particular, in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, and to remove impediments to and perfect the mechanisms of
a free and open market and a national market system, by having strike
price intervals and trading hours established prior to the commencement
of trading in options on Index-Linked Securities and thereby lessening
the likelihood for investor confusion.
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\9\ 15 U.S.C. 78f(b).
\10\ 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 35 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 the 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. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File No. SR-Phlx-2010-40 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2010-40. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://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 a.m. and
[[Page 13616]]
3 p.m. Copies of such filing also will be available for inspection and
copying at the principal office of the Exchange. All comments received
will be posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-Phlx-2010-40 and should be submitted on
or before April 6, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-6113 Filed 3-19-10; 8:45 am]
BILLING CODE 8011-01-P