[Federal Register Volume 76, Number 8 (Wednesday, January 12, 2011)]
[Notices]
[Pages 2182-2183]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-441]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63654; File No. SR-Phlx-2010-158]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Order
Granting Approval of Proposed Rule Change Establishing a $5 Strike
Price Program
January 6, 2011.
I. Introduction
On November 12, 2010, NASDAQ OMX PHLX LLC (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to allow the Exchange to list and trade option
series with strike price intervals of $5 or greater where the strike
price is more than $200 in up to five option classes on individual
stocks. The proposed rule change, as amended, was published for comment
in the Federal Register on November 24, 2010.\3\ The Commission
received no comment letters on the proposal. This order approves the
proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 63339 (November 18,
2010), 75 FR 71771 (``Notice'').
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II. Description of the Proposal
Phlx has proposed to modify Commentary .05 to Exchange Rule 1012 to
allow the Exchange to list and trade series in intervals of $5 or
greater where the strike price is more than $200 in up to five option
classes on individual stocks (``$5 Strike Price Program''). Currently,
Exchange Rule 1012 at Commentary .05 permits strike price intervals of
$10 or greater where the strike price is $200 or more.\4\ The proposal
would allow the Exchange to list series in intervals of $5 or greater
where the strike price is more than $200 in up to five option classes
on individual stocks.
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\4\ Commentary .05 also permits strike price intervals of $5 or
greater where the strike price is greater than $25 but less than
$200; and $2.50 or greater where the strike price is $25 or less.
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In support of its proposal, Phlx stated that it believes the
proposed $5 Strike Price Program would provide investors increased
opportunities to improve returns and manage risk in the trading of
equity options that overlie high priced stocks. In addition, the
Exchange believes the proposed $5 Strike Price Program would allow
investors to establish equity options positions that are better
tailored to meet their investment, trading, and risk management
requirements.
Phlx further stated that it has analyzed its capacity and
represented that the Exchange and the Options Price Reporting Authority
have the necessary systems capacity to handle the potential additional
traffic associated with the listing and trading of new series
associated with the $5 Strike Price Program.
III. Discussion
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\5\
Specifically, the Commission finds that the proposal is consistent with
Section 6(b)(5) of the Act,\6\ which requires, among other things, that
the rules of a national securities exchange be designed to promote just
and equitable principles of trade, to prevent fraudulent and
manipulative acts, 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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\5\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\6\ 15 U.S.C. 78f(b)(5).
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As the Exchange notes, the proposal should provide investors with
added flexibility in the trading of options on high-priced securities
and allow investors to establish options positions that are more
precisely tailored to meet their investment objectives. The Commission
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
[[Page 2183]]
corresponding increase in quotes and market fragmentation. The
Commission expects the Exchange to 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.
In addition, the Commission notes that Phlx has represented that it
believes the Exchange and the Options Price Reporting Authority have
the necessary systems capacity to handle the additional traffic
associated with the newly permitted listings.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\7\ that the proposed rule change (SR-Phlx-2010-158) be, and it
hereby is, approved.
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\7\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-441 Filed 1-11-11; 8:45 am]
BILLING CODE 8011-01-P