[Federal Register Volume 78, Number 154 (Friday, August 9, 2013)]
[Notices]
[Pages 48754-48756]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-19263]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70116; File No. SR-Phlx-2013-79]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Regarding 
Delisting Series in the STOs and Opening up to Five Consecutive Weekly 
Expirations of STOs

August 5, 2013.
    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 July 25, 2013, NASDAQ OMX PHLX LLC (the ``Exchange'' or 
``Phlx'') filed with the Securities and Exchange Commission 
(``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 Substance 
of the Proposed Rule Change

    The Exchange is filing with the Commission a proposal to amend Rule 
1012 (Series of Options Open for Trading) and Rule 1101A (Terms of

[[Page 48755]]

Option Contracts) to provide for the ability to open up to five 
consecutive expirations under the Short Term Option Program (``STO 
Program'' or ``Program'') \3\ for trading on the Exchange, to allow for 
the Exchange to delist any series in the STOs that do not have open 
interest, and to expand the number of series in STOs under limited 
circumstances when there are no series at least 10% but not more than 
30% away from the current price of the underlying security.
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    \3\ STOs, also known as ``weekly options'' as well as ``Short 
Term Options'', are series in an options class that are approved for 
listing and trading on the Exchange in which the series are opened 
for trading on any Thursday or Friday that is a business day and 
that expire on the Friday of the next business week. If a Thursday 
or Friday is not a business day, the series may be opened (or shall 
expire) on the first business day immediately prior to that Thursday 
or Friday, respectively. See Rules 1000(b)(44), 1000A(b)(16), 
Commentary .11 to Rule 1012 and Rule 1101A(b)(vi) regarding the STO 
Program in various options.
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLX/Filings/, 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 proposed rule change is to amend Commentary .11 
to Rule 1012 for non-index options and Rule 1101A(b)(vi) for index 
options to provide for the ability to open up to five consecutive 
expirations under the STO Program for trading on the Exchange, to allow 
for the Exchange to delist any series in the STOs that do not have open 
interest, and to expand the number of series in STOs under limited 
circumstances when there are no series at least 10% but not more than 
30% away from the current price of the underlying security.\4\
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    \4\ See Securities Exchange Act Release No. 62296 (June 15, 
2010), 75 FR 35115 (June 21, 2010)(SR-Phlx-2010-84) (notice of 
filing and immediate effectiveness permanently establishing STO 
Program on the Exchange).
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    Currently, after an option class has been approved for listing and 
trading on the Exchange, the Exchange may open for trading options 
pursuant to its STO Program. The Exchange may also match any option 
classes that are selected by other securities exchanges that employ a 
similar STO program under their respective rules. For each option class 
eligible for participation in the STO Program, the Exchange may open up 
to 30 Short Term Option Series for each expiration date in that 
class.\5\
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    \5\ See Commentary .11 of Rule 1012 and Rule 1101A(b)(vi) for a 
discussion of these and other features of the STO Program.
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    This proposal seeks to allow the Exchange to open STO series for up 
to five consecutive week expirations. The Exchange proposes to add in 
Commentary .11 of Rule 1012 and Rule 1101A(b)(vi) a maximum of five 
consecutive week expirations under the STO Program; however a STO 
expiration will not be added in the same week that a monthly options 
series expires or, in the case of Quarterly Option Series (``QOS''),\6\ 
on an expiration that coincides with an expiration of QOS on the same 
class. In other words, the total number of consecutive expirations will 
be five, including any existing monthly or quarterly expirations.\7\ 
This change is being proposed notwithstanding the current cap of 30 
series per class under the STO Program. The Exchange notes that the STO 
Program has been well-received by market participants, in particular by 
retail investors.\8\
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    \6\ See Commentary .08 of Rule 1012 and Rule 1101A(b)(iv) for a 
discussion of QOS.
    \7\ For example, if QOS expire week 1 and monthly options expire 
week 3 from now, the proposal would allow the following expirations: 
Week 1 QOS, week 2 STOs, week 3 monthly, week 4 STOs, and week 5 
STOs. If QOS expire week 3 and monthly options expire week 5, the 
following expirations would be allowed: Week 1 STOs, week 2 STOs, 
week 3 QOS, week 4 STOs, and week 5 monthly.
    \8\ Since the STO Program has been adopted, it has seen rapid 
acceptance among industry participants, as evidenced by the 
expansion of the number of classes eligible for the STO Program by 
various exchanges. See Securities Exchange Act Release Nos. 65775 
(November 17, 2011), 76 FR 72473 (November 23, 2011) (SR-NASDAQ-
2011-138); 65776 (November 17, 2011), 76 FR 72482 (November 23, 
2011) (SR-PHLX-2011-131); 66563 (March 9, 2012), 77 FR 15426 (March 
15, 2012) (SR-CBOE-2012-026); 67194 (June 13, 2012), 77 FR 36597 
(June 19, 2012) (SR-NYSEMKT-2012-08); and 67178 (June 11, 2012), 77 
FR 36305 (June 18, 2012) (SR-NYSEArca-2012-60). Moreover, since the 
inception of STOs on the Exchange and other markets, STO volume has 
significantly grown as the volume of standard options decreased, 
such that currently STOs represent approximately 31% of the trading 
volume across all option exchanges.
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    The Exchange believes that the current proposed revision to the STO 
Program will permit the Exchange to meet increased customer demand. The 
proposed revision will also provide market participants with the 
ability to trade and hedge in a greater number of option classes and 
series.
    With regard to the impact of this proposal on system capacity, the 
Exchange has analyzed its capacity and represents that it and the 
Options Price Reporting Authority (``OPRA'') have the necessary systems 
capacity to handle the potential additional traffic associated with 
trading of an expanded number of expirations that participate in the 
STO Program.
    In addition, to provide for circumstances where the underlying 
security has moved such that there are no series that are at least 10% 
above or below the current price of the underlying security, the 
Exchange is proposing to add new language to Commentary .11 of Rule 
1012 and Rule 1101A(b)(vi) to provide that the Exchange would delist 
series with no open interest in both the call and the put series 
having: (i) A strike higher than the highest price with open interest 
in the put and/or call series for a given expiration week; and (ii) a 
strike lower than the lowest strike price with open interest in the put 
and/or the call series for a given expiration week, so as to list 
series that are at least 10% but not more than 30% above or below the 
current price of the underlying security. Further, in the event that 
all existing series have open interest and there are no series at least 
10% above or below the current price of the underlying security, the 
Exchange may list additional series, in excess of the 30 allowed 
currently in the STO Program, that are at least 10% and not more than 
30% above or below the current price of the underlying security. The 
Exchange believes that it is important to allow investors to roll 
existing option positions and ensure that there are always series at 
least 10% but not more than 30% above or below the current price of the 
underlying security. The proposal will give investors this needed 
flexibility.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\9\ in general, and furthers the objectives of Section 6(b)(5),\10\ 
in particular, in that it

[[Page 48756]]

is designed to promote just and equitable principles of trade, 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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that expanding the STO Program will result in 
a continuing benefit to investors by giving them more flexibility to 
closely tailor their investment decisions and hedging decisions in a 
greater number of securities. The Exchange also believes that expanding 
the STO Program will provide the investing public and other market 
participants with additional opportunities to hedge their investment, 
thus allowing these investors to better manage their risk exposure. 
While the expansion of the STO Program will generate additional quote 
traffic, the Exchange does not believe that this increased traffic will 
become unmanageable since the proposal remains limited to a fixed 
number of expirations.
    The Exchange believes that the ability to delist series with no 
open interest in both the call and the put series will benefit 
investors by devoting the STO cap to those series that are more closely 
tailored to the investment decisions and hedging decisions of 
investors.

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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. To the contrary, the 
Exchange believes that the proposal is decidedly pro-competitive. The 
Exchange believes that the proposed rule change will result in 
additional investment options and opportunities to achieve the 
investment objectives of market participants seeking efficient trading 
and hedging vehicles, to the benefit of investors, market participants, 
and the marketplace in general.

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 significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not 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) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of 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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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest in that it will allow Phlx to offer additional STO 
products to traders and investors in the same manner as other 
exchanges.\13\ In sum, the proposed rule change presents no novel 
issues, and waiver will allow the Exchange to remain competitive with 
other exchanges. Therefore, the Commission designates the proposal 
operative upon filing.\14\
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    \13\ See Securities Exchange Act Release Nos. 68190 (November 8, 
2012), 77 FR 68193 (November 15, 2012) (SR-NYSEArca-2012-95); and 
68191 (November 8, 2012), 77 FR 68194 (SR-NYSEMKT-2012-42). See 
also, Securities Exchange Act Release Nos. 68242 (November 15, 
2012), 77 FR 69908 (November 21, 2012) (SR-CBOE-2012-110) (notice of 
filing and immediate effectiveness); 68318 (November 29, 2012), 77 
FR 72426 (December 5, 2012) (SR-ISE-2012-90) (notice of filing and 
immediate effectiveness); and 68361 (December 5, 2012), 77 FR 73729 
(December 11, 2012) (SR-BOX-2012-020) (notice of filing and 
immediate effectiveness).
    \14\ For purposes only of waiving the 30-day operative delay, 
the Commission has 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 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 under 
Section 19(b)(2)(B) \15\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \15\ 15 U.S.C. 78s(b)(2)(B).
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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-2013-79 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-2013-79. 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 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-2013-79 and should be 
submitted on or before August 30, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-19263 Filed 8-8-13; 8:45 am]
BILLING CODE 8011-01-P