[Federal Register Volume 76, Number 195 (Friday, October 7, 2011)]
[Notices]
[Pages 62484-62486]
From the Federal Register Online via the Government Publishing 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

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(``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 [email protected]. 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