[Federal Register Volume 75, Number 67 (Thursday, April 8, 2010)]
[Notices]
[Pages 17987-17988]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-7941]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61828; File No. SR-Phlx-2010-52]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating
to Order Price Protection
April 1, 2010.
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 March 31, 2010, NASDAQ OMX PHLX, Inc. (``Phlx'' or the ``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 proposes to amend Rule 1080, Commentary .07, to
provide for an Order Price Protection feature on Phlx XL, the
Exchange's enhanced electronic trading platform for options.\3\
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\3\ See Securities Exchange Act Release No. 59995 (May 28,
2009), 74 FR 26750 (June 3, 2009) (SR-Phlx-2009-32).
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The text of the proposed rule change is available on the Exchange's
Web site at http://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
In order to address risks to market participants of human error in
entering orders at unintended prices, the Exchange has developed a
program in the Phlx XL system known as Phlx XL Order Price Protection
(``OPP''). OPP is a feature of Phlx XL that would prevent certain
orders from executing or being placed on the book at prices outside
pre-set standard limits. The Phlx XL system would reject such orders
rather than executing them automatically. The operation of the Phlx XL
system would be set forth in new Commentary .07 to Phlx Rule 1080, Phlx
XL and Phlx XL II.
The OPP feature would prevent certain day limit, good til
cancelled, immediate or cancel, and all-or-none orders at prices
outside of certain pre-set limits from being accepted by the system.
OPP would apply to all options, but would not apply to market orders,
stop limit orders, Intermarket Sweep Orders, or complex orders. OPP
would be operational each trading day after the opening until the close
of trading, except during trading halts. The Exchange would also be
able to temporarily deactivate OPP from time to time on an intraday
basis at its discretion if it determined that volatility warranted
deactivation. Members would be notified of intraday OPP deactivation
due to volatility and any subsequent intraday reactivation by the
Exchange through the issuance of system status messages.
The OPP will help users of Phlx XL control risk by checking each
order, before it is accepted into the system, against certain
parameters established by Rule 1080, Commentary .07. It would compare
price instructions on the order against the current contra-side NBBO,
and would automatically reject the order if it is priced outside the
range established in Rule 1080, Commentary .07.
The range of permissible orders depends on whether the contra-side
of an incoming order is greater than $1.00, or equal to or less than
$1.00. If the NBBO on the contra-side of an incoming order were greater
than $1.00, orders with a limit more than 50% through such contra-side
NBBO would be rejected by Phlx XL upon receipt. For example, if the
NBBO on the offer side were $1.10, an order to buy options for more
than $1.65 would be rejected. Similarly, if the NBBO on the bid side
were $1.10, an order to sell options for less than $0.55 would be
rejected.
If the NBBO on the contra-side of an incoming order were less than
or equal to $1.00, orders with a limit more than 100% through such
contra-side NBBO would be rejected by Phlx XL upon receipt. For
example, if the NBBO on the offer side were $1.00, an order to buy
options for more than $2.00 would be rejected. However, if the NBBO of
the bid side of an incoming order to sell were less than or equal to
$1.00, the OPP limits set forth above would result in all incoming sell
orders being accepted regardless of their limit. To illustrate, if the
NBBO on the bid side were equal to $1.00, the OPP limits provide
protection such that all orders to sell with a limit less than $0.00
would be rejected.
The Exchange anticipates implementing the OPP feature on May 1,
2010. The Exchange will notify members through the issuance of an
Options Trader Alert when the feature becomes operational and the rule
becomes operative.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \4\ in general, and furthers the objectives of Section
6(b)(5) of the Act \5\ 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 mitigating risks to market participants of human error in entering
orders at clearly unintended prices.
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\4\ 15 U.S.C. 78f(b).
\5\ 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.
[[Page 17988]]
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to 19(b)(3)(A) of the Act \6\ and Rule 19b-4(f)(6) \7\
thereunder.
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\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate 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 (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-Phlx-2010-52 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-2010-52. 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,\8\ 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 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-2010-52 and should be submitted on or before April
29, 2010.
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\8\ The text of the proposed rule change is available on the
Commission's Web site at http://www.sec.gov/rules/sro.shtml.
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. 2010-7941 Filed 4-7-10; 8:45 am]
BILLING CODE 8011-01-P