[Federal Register Volume 77, Number 172 (Wednesday, September 5, 2012)]
[Notices]
[Pages 54635-54636]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-21766]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67753; File No. SR-Phlx-2012-78]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Order
Granting Approval of Proposed Rule Change Regarding Strike Price
Intervals in the Short Term Options Program
August 29, 2012.
I. Introduction
On July 2, 2012, 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
indicate that the interval between strike prices on short term options
series (``STOs'') listed in accordance with its Short Term Option
Series Program (``STO Program'') shall be $0.50 or greater where the
strike price is less than $75 and $1 or greater where the strike price
is between $75 and $150. The proposal would also provide that, during
the expiration week of an option that is in the same class as an STO
but has a longer expiration cycle (``Related non-STO'') the strike
price interval for the STO and such Related non-STO shall be the same
and that a Related non-STO shall be opened for trading in STO intervals
in the same manner as the STO. The proposed rule change was published
for comment in the Federal Register on July 20, 2012.\3\ The Commission
received one comment letter on the proposal.\4\ On August 16, 2012, the
Exchange filed a response to the CBOE Letter (``Phlx Response'').\5\
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. 67446 (July 20, 2012),
77 FR 42780 (``Notice'').
\4\ See letter from Jenny L. Klebes-Golding, Senior Attorney,
Legal Division, Chicago Board Options Exchange, Incorporated
(``CBOE''), to Elizabeth M. Murphy, Secretary, Commission, dated
August 10, 2012 (``CBOE Letter''). CBOE sought, in part, further
clarification on whether the current 30 series per-class limitation
set forth in the STO Program would apply to the Related non-STOs
when the STO strike price intervals are added in accordance with
this proposal.
\5\ In its response, Phlx confirmed that the 30 series
limitation CBOE identified applies to STOs only and would not
restrict the ability to open additional series of Related non-STOs
in accordance with the proposed rule change. See Phlx Response at 2-
3.
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II. Description of the Proposal
The Exchange proposed to amend Phlx Rules 1012 (Series of Options
Open for Trading) and 1101A (Terms of Options Contracts) to indicate
that the interval between strike prices on STOs shall be $0.50 or
greater where the strike price is less than $75 and $1 or greater where
the strike price is between $75 and $150 (``STO Intervals''). The
proposal would amend Phlx's rules to indicate that, during expiration
week of a Related non-STO, the strike price intervals for the STO and
Related non-STO shall be the same. Phlx also proposed to amend its
rules to indicate that, during the week before the expiration week of
the Related non-STO, such Related non-STO shall be opened for trading
in the STO Intervals and in the same manner as the STO.
In the Notice, the Exchange stated that the principal reason for
the proposed expansion is market demand for weekly options and
continuing strong customer demand to use STOs to effectively execute
hedging and trading strategies.\6\ Conversely, Phlx contended that
inadequately narrow STO intervals can impact trading and hedging
opportunities.\7\ Phlx also stated that listing Related non-STOs at the
same strike prices intervals as STOs will ensure conformity and give
investors and traders the ability to maximize trading and hedging
opportunities and minimize associated costs.\8\
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\6\ See Notice, supra note 3 at 42781.
\7\ Id. at 42782-42783.
\8\ Id. at 42783.
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The Exchange stated that it has analyzed its capacity, and
represented that it and the Options Price Reporting Authority
(``OPRA'') have the necessary systems capacity to handle the potential
additional traffic associated with trading in STOs at $0.50 or greater
where the strike price is less than $75 and $1 or greater where the
strike price is between $75 and $150. In addition, Phlx stated that it
believes that the proposed rule change will not raise a capacity issue
with its members.\9\
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\9\ Id.
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III. Discussion and Commission Findings
After careful review of the proposed rule change and the CBOE
Letter, 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.\10\ Specifically, the Commission finds that the proposal is
consistent with Section 6(b)(5) of the Act,\11\ 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. The
Commission believes that the proposal strikes a reasonable balance
between the Exchange's desire to offer a wider array of investment
opportunities and the
[[Page 54636]]
need to avoid unnecessary proliferation of options series.
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\10\ 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).
\11\ 15 U.S.C. 78f(b)(5).
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In approving this proposal, the Commission notes that Exchange has
represented that it and OPRA have the necessary systems capacity to
handle the potential additional traffic associated with trading STOs
and Related non-STOs at more granular strike price intervals. 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.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\12\ that the proposed rule change (SR-Phlx-2012-78) be, and it
hereby is, approved.
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\12\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-21766 Filed 9-4-12; 8:45 am]
BILLING CODE 8011-01-P