[Federal Register Volume 79, Number 104 (Friday, May 30, 2014)]
[Notices]
[Pages 31164-31166]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-12525]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72245; File No. SR-Phlx-2014-37]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
to Extension of the Exchange's Penny Pilot Program and Replacement of
Penny Pilot Issues That Have Been Delisted
May 23, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given
that on May 20, 2014, 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, 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 is filing with the Commission a proposal to amend Phlx
Rule 1034 (Minimum Increments) to extend through December 31, 2014, the
Penny Pilot Program in options classes in certain issues (``Penny
Pilot'' or ``Pilot''), and to change the date when delisted classes may
be replaced in the Penny Pilot.\3\
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\3\ The Penny Pilot was established in January 2007 and was last
extended in December 2013. See Securities Exchange Act Release Nos.
55153 (January 23, 2007), 72 FR 4553 (January 31, 2007) (SR-Phlx-
2006-74) (notice of filing and approval order establishing Penny
Pilot); and 71106 (December 17, 2013), 78 FR 77509 (December 23,
2013) (SR-Phlx-2013-123) (notice of filing and immediate
effectiveness extending the Penny Pilot through June 30, 2014).
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The Exchange requests that the Commission waive the 30-day
operative delay period to the extent needed for timely industry-wide
implementation of the proposal.
The text of the amended Exchange rule is set forth immediately
below.
Proposed new language is underlined and proposed deleted language
is [bracketed].
NASDAQ OMX PHLX Rules
Options Rules
* * * * *
[[Page 31165]]
Rule 1034. Minimum Increments
(a) Except as provided in sub-paragraphs (i)(B) and (iii) below,
all options on stocks, index options, and Exchange Traded Fund
Shares quoting in decimals at $3.00 or higher shall have a minimum
increment of $.10, and all options on stocks and index options
quoting in decimals under $3.00 shall have a minimum increment of
$.05.
(i)(A) No Change.
(B) For a pilot period scheduled to expire [June 30,
2014]December 31, 2014 (the ``pilot''), certain options shall be
quoted and traded on the Exchange in minimum increments of $0.01 for
all series in such options with a price of less than $3.00, and in
minimum increments of $0.05 for all series in such options with a
price of $3.00 or higher, except that options overlying the
PowerShares QQQ Trust (``QQQQ'')[supreg], SPDR S&P 500 Exchange
Traded Funds (``SPY''), and iShares Russell 2000 Index Funds
(``IWM'') shall be quoted and traded in minimum increments of $0.01
for all series regardless of the price. A list of such options shall
be communicated to membership via an Options Trader Alert (``OTA'')
posted on the Exchange's Web site.
The Exchange may replace any pilot issues that have been
delisted with the next most actively traded multiply listed options
classes that are not yet included in the pilot, based on trading
activity in the previous six months. The replacement issues may be
added to the pilot on the second trading day following [January 1,
2014]July 1, 2014.
(C) No Change.
(ii)-(v) No Change.
* * * * *
The text of the proposed rule change is available on the Exchange's
Web site at http://nasdaqomxphlx.cchwallstreet. com, 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
The purpose of this filing is to amend Phlx Rule 1034 to extend the
Penny Pilot through December 31, 2014, and to change the date when
delisted classes may be replaced in the Penny Pilot.
Under the Penny Pilot, the minimum price variation for all
participating options classes, except for the Nasdaq-100 Index Tracking
Stock (``QQQQ''), the SPDR S&P 500 Exchange Traded Fund (``SPY'') and
the iShares Russell 2000 Index Fund (``IWM''), is $0.01 for all
quotations in options series that are quoted at less than $3 per
contract and $0.05 for all quotations in options series that are quoted
at $3 per contract or greater. QQQQ, SPY and IWM are quoted in $0.01
increments for all options series. The Penny Pilot is currently
scheduled to expire on June 30, 2014.
The Exchange proposes to extend the time period of the Penny Pilot
through December 31, 2014, and to provide revised dates for adding
replacement issues to the Penny Pilot. The Exchange proposes that any
Penny Pilot Program issues that have been delisted may be replaced on
the second trading day following July 1, 2014. The replacement issues
will be selected based on trading activity in the previous six
months.\4\
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\4\ The replacement issues will be announced to the Exchange's
membership via an Options Trader Alert (OTA) posted on the
Exchange's Web site. The Exchange proposes in its Penny Pilot rule
that replacement issues will be selected based on trading activity
in the previous six months. The replacement issues would be
identified based on The Option Clearing Corporation's trading volume
data from December 1, 2013 through May 31, 2014. The month
immediately preceding the replacement issues' addition to the Pilot
Program (i.e. June) would not be used for purposes of the six-month
analysis.
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This filing does not propose any substantive changes to the Penny
Pilot Program; all classes currently participating in the Penny Pilot
will remain the same and all minimum increments will remain unchanged.
The Exchange believes the benefits to public customers and other market
participants who will be able to express their true prices to buy and
sell options have been demonstrated to outweigh the potential increase
in quote traffic.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \5\ in general, and furthers the objectives of Section
6(b)(5) of the Act \6\ 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 mechanism of a free and open
market and a national market system.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
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In particular, the proposed rule change, which extends the Penny
Pilot for an additional six months through December 31, 2014 and
changes the date for replacing Penny Pilot issues that were delisted to
the second trading day following July 1, 2014, will enable public
customers and other market participants to express their true prices to
buy and sell options for the benefit of all market participants. This
is consistent with the Act.
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. To the contrary, this proposal
is pro-competitive because it allows Penny Pilot issues to continue
trading on the Exchange. Moreover, the Exchange believes that the
proposed rule change will allow for further analysis of the Pilot and a
determination of how the Pilot should be structured in the future; and
will serve to promote regulatory clarity and consistency, thereby
reducing burdens on the marketplace and facilitating investor
protection. The Pilot is an industry wide initiative supported by all
other option exchanges. The Exchange believes that extending the Pilot
will allow for continued competition between market participants on the
Exchange trading similar products as their counterparts on other
exchanges, while at the same time allowing the Exchange to continue to
compete for order flow with other exchanges in option issues trading as
part of the Pilot.
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
[[Page 31166]]
19(b)(3)(A) \7\ of the Act and subparagraph (f)(6) of Rule 19b-4
thereunder.\8\
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f)(6).
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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: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) 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
Send an email to [email protected]. Please include
File Number SR-Phlx-2014-37 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, Station Place, 100 F Street NE., Washington,
DC 20549-1090.
All submissions should refer to File Number SR-Phlx-2014-37. 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, 100 F Street NE., Washington,
DC 20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of Phlx. 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-2014-37 and
should be submitted on or before June 20, 2014.
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\9\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-12525 Filed 5-29-14; 8:45 am]
BILLING CODE 8011-01-P