[Federal Register Volume 76, Number 195 (Friday, October 7, 2011)]
[Notices]
[Pages 62484-62486]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-25957]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65467; File No. SR-NASDAQ-2011-136]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify NASDAQ Options Market Rules Chapter VII, Section 6, Market Maker
Quotations
October 3, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
[[Page 62485]]
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 28, 2011, The NASDAQ Stock Market LLC (``NASDAQ'' 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 NASDAQ. 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 the
Substance of the Proposed Rule Change
NASDAQ is filing a proposal for the NASDAQ Options Market (``NOM'')
to amend Chapter VII, Section 6, Market Maker Quotations, to permit
wider bid/ask differentials to correspond to the width of the market in
the underlying security, as described below.
The text of the proposed rule change is available at
nasdaq.cchwallstreet.com, at NASDAQ's principal office, 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, NASDAQ 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. NASDAQ 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 modify recently-
adopted bid/ask differentials. The new bid/ask differentials, also
known as quotation spread parameters, establish the maximum permissible
width between a Market Maker's bid and an offer in a particular series.
Recently, NASDAQ adopted a $5 wide quote spread parameters for all
options.\3\ Previously, there was no quote spread requirement and
NASDAQ adopted the $5 wide requirement in order to encourage narrower
markets and thereby improve the quality of NOM's markets.
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\3\ See NOM Rules, Chapter VII, Section 6(d)(ii). Securities
Exchange Act Release No. 64054 (March 8, 2011), 76 FR 14111 (March
15, 2011).
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At this time, NASDAQ proposes to permit wider bid/ask differentials
to correspond to the width of the market in the underlying security.
Specifically, NASDAQ proposes to amend Chapter VII, Section 6, Market
Maker Quotations, to provide that respecting in-the-money series \4\
where the market for the underlying security is wider than $5, the bid/
ask differential may be as wide as the quotation for the underlying
security on the primary market.\5\ For instance, under the current
rule, where the market for the underlying security in the primary
market is $60-$70, the applicable quote spread parameter is $5, but
under the proposed language, it would be $10 for the in-the-money
series, which is the spread in the underlying security in the primary
market. NASDAQ believes that this is appropriate because options are
priced relative to the price of the security underlying that option and
are often hedged with the underlying security as well; accordingly, the
price of an in-the-money option is particularly constrained by a quote
spread parameter requirement that does not take into account a quote
spread in the underlying security greater than $5.
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\4\ In-the-money series are those series, where, in the case of
call options, the current market price of the underlying security is
higher than the strike price, or, in the case of put options, the
current market price of the underlying security is lower than the
strike price.
\5\ Primary market is defined in Chapter I, Section 1(a)(47) as,
in the case of securities listed on Nasdaq, the market that is
identified as the listing market pursuant to Section X(d) of the
approved national market system plan governing the trading of
Nasdaq-listed securities, and, in the case of securities listed on
another national securities exchange, the market that is identified
as the listing market pursuant to Section XI of the Consolidated
Tape association Plan.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \6\ in general, and furthers the objectives of Section
6(b)(5) of the Act \7\ 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, and, in general, to protect
investors and the public interest because it will help conform NOM's
rules to those of other exchanges, as described below, which should, in
term, avoid confusion and promote competition among exchanges.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NASDAQ does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor 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 Section 19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) \9\
thereunder.
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 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 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. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or 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
[[Page 62486]]
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2011-136 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-NASDAQ-2011-136. 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 3 p.m. Copies
of such filing also will be available for inspection and copying at the
principal offices 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-NASDAQ-2011-136, and should be submitted on or before
October 28, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-25957 Filed 10-6-11; 8:45 am]
BILLING CODE 8011-01-P