[Federal Register Volume 78, Number 56 (Friday, March 22, 2013)]
[Notices]
[Pages 17725-17727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-06608]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69162; File No. SR-Phlx-2013-34]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Mini Options
March 18, 2012.
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 18, 2013, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
the proposed rule change as described in Items I and II 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 the
Substance of the Proposed Rule Change
The Exchange proposes to address the manner in which options
contracts overlying 10 shares of a security (``Mini Options'') will
trade as a Complex Order.\3\
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\3\ A Complex Order is any order involving the simultaneous
purchase and/or sale of two or more different options series in the
same underlying security, priced at a net debit or credit based on
the relative prices of the individual components, for the same
account, for the purpose of executing a particular investment
strategy. Furthermore, a Complex Order can also be a stock-option
order, which is an order to buy or sell a stated number of units of
an underlying stock or exchange-traded fund (``ETF'') coupled with
the purchase or sale of options contract(s). See Exchange Rule 1080,
Commentary .08(a)(i).
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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.
[[Page 17726]]
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
The purpose of the proposed rule change is to provide for the
manner in which Mini Options will trade as a Complex Order pursuant to
Exchange Rule 1080. The Exchange previously filed to list and trade
Mini Options.\4\ Exchange Rule 1080 entitled ``Phlx XL and Phlx XL II''
describes the manner in which Complex Orders,\5\ trade on the Exchange.
The Exchange will describe below the manner in which Rule 1080 operates
with respect to Mini Options.
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\4\ See Securities Exchange Act Release No. 68132 (November 1,
2012), 77 FR 66904 (November 7, 2012) (SR-Phlx-2012-126). The
Exchange amended amend Rules 1001 (Position Limits), 1012 (Series of
Options Open for Trading) and 1033 (Bids and Offers--Premium) to
list and trade Mini Options overlying five (5) high-priced
securities for which the standard contract overlying the same
security exhibits significant liquidity. Specifically, the Exchange
filed to list Mini Options on SPDR S&P 500 (``SPY''), Apple, Inc.
(``AAPL''), SPDR Gold Trust (``GLD''), Google Inc. (``GOOG'') and
Amazon.com Inc. (``AMZN''). The Exchange filed a separate proposal
to specify the application of Mini Options to Qualified Contingent
Cross and PIXL transactions. See SR-Phlx-2013-32 (not yet
published).
\5\ See Commentary .08 to Exchange Rule 1080.
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With respect to Complex Orders, the Exchange states in Rule 1080
that Complex Orders involve the simultaneous purchase and/or sale of
two or more different options series in the same underlying security,
priced as a net debit or credit based on relative prices of the
individual components. The Exchange would permit Mini Options to trade
as Complex Orders provided that the order involves the simultaneous
purchase and/or sale of two or more different Mini Options series in
the same underlying security, priced as a net debit or credit based on
relative prices of the individual components and Mini Options are only
part of a Complex Order strategy that includes other Mini Options. For
example, a Complex Order strategy cannot be comprised of standard
options in AAPL and Mini Options in AAPL7. Also, with respect to
Complex Orders, the Exchange will not permit Mini Options to trade as a
stock-option order. The Exchange proposes to add rule text with respect
to Mini Options trading as Complex Orders to Commentary .08 of Rule
1080.
The Exchange proposes to commence trading Mini Options on March 22,
2013.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Securities and Exchange Act of
1934 (``Exchange Act''),\6\ in general, and with Section 6(b)(5) of the
Exchange Act,\7\ in particular, in that the proposal is designed to
prevent fraudulent and manipulative acts and practices, 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.
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\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(b)(5).
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Specifically, the Exchange believes that investors and other market
participants would benefit from the current rule proposal because it
would allow market participants to take advantage of legitimate
investment strategies and execute Complex Orders in Mini Options.
Additionally, the Exchange believes the proposed rule change will avoid
investor confusion by providing how Mini Options will trade the same or
different as compared to standard options with respect to Complex
Orders.
The Exchange's proposal to permit Mini Options to trade as Complex
Orders provided the strategy does not combine Mini Options and standard
options serves to maintain the permissible ratios that are applicable
to Complex Orders by separating the trading of standard Complex Orders
and Mini Options Complex Orders. Also, the Exchange has determined to
not permit Mini Option Complex Orders to trade as a stock-option order
because as Mini Options are a new product, the Exchange would like to
consider the impact in this area and file to amend the rule at a later
date.
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. All members may transact
Complex Orders on Phlx. The rule change does not permit unfair
discrimination and does not impose a burden on Members with respect to
trading Mini Options.
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 from the date on which it was
filed, or such shorter time as the Commission may designate, it has
become effective pursuant to Section 19(b)(3)(A) \8\ of the Act 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 the 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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A proposed rule change filed under Rule 19b-4(f)(6) of the Act \10\
normally does not become operative prior to 30 days after the date of
the filing. However, pursuant to Rule 19b-4(f)(6)(iii) of the Act,\11\
the Commission may designate a shorter time if such action is
consistent with the protection of investors and the public interest.
The Exchange has requested the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. In November 2012, the Exchange filed a proposed rule change to
amend its rules to list and trade certain mini-options contracts on the
Exchange, and represented in that filing that the Exchange's rules that
apply to the trading of standard options contracts would apply to mini-
options contracts.\12\ The Exchange has represented that it intends to
launch trading in mini-options contracts on March 22, 2013. The
Exchange believes that waiver of the 30-day operative
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delay is consistent with the protection of investors and the public
interest because such waiver would minimize confusion among market
participants about how complex orders and stock-options orders
involving mini-options contracts will trade.\13\
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\10\ 17 CFR 240.19b-4(f)(6).
\11\ 17 CFR 240.19b-4(f)(6)(iii).
\12\ See Securities Exchange Act Release No. 68132 (November 1,
2012), 77 FR 66904 (November 7, 2012) (SR-Phlx-2012-126).
\13\ See id.
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The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
Such waiver would allow the Exchange to implement the proposed rule
change prior to its launch of mini-options contracts trading on March
22, 2013, thereby mitigating potential investor confusion as to how
complex orders and stock options orders involving mini-options
contracts will trade. For this reason, the Commission hereby waives the
30-day operative delay and designates the proposed rule change to be
operative upon filing with the Commission.\14\
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\14\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of such 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 change 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
Send an email to [email protected]. Please include
File Number SR-Phlx-2013-34 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-2013-34. This file
number should be included on the subject line if email 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 10:00 a.m. and 3:00 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-Phlx-2013-34, and should be submitted on or before April
12, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-06608 Filed 3-21-13; 8:45 am]
BILLING CODE 8011-01-P