[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