[Federal Register Volume 79, Number 156 (Wednesday, August 13, 2014)]
[Notices]
[Pages 47509-47511]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-19095]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72786; File No. SR-Phlx-2014-53]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Regarding 
the Short Term Option Series Program

August 7, 2014.
    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 August 1, 2014, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') 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 the 
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 
Option Contracts) to conform Exchange rules pertaining to finer strike 
price intervals for standard expiration contracts in option classes 
that also have Short Term Options (``STOs'') \3\ listed on them 
(``related non-STOs'', ``related non-Short Term Options'', or ``non-
STOs'').
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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. STOs are listed and traded pursuant to the 
STO Program. For STO Program rules regarding non-index options, see 
Rule 1000(b)(44) and Commentary .11 to Rule 1012. For STO Program 
rules regarding index options, see Rule 1000A(b)(16) and Rule 
1101A(b)(vi).
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    The text of the proposed rule change is available on the Exchange's 
Web site

[[Page 47510]]

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 proposed rule change is to amend Rule 1012 and 
Rule 1101A to conform Exchange rules pertaining to finer strike price 
intervals for standard expiration contracts in option classes that also 
have STOs listed on them.
    The STO Program, which was initiated in 2010,\4\ is codified in 
Commentary .11 to Rule 1012 for non-index options including equity, 
currency, and exchange traded fund (``ETF'') options, and in Rule 
1101A(b)(vi) for index options. Under these rules, the Exchange may 
list STOs in up to fifty option classes,\5\ including up to thirty 
index option classes,\6\ in addition to option classes that are 
selected by other securities exchanges that employ a similar program 
under their respective rules. For each of these option classes, the 
Exchange may list five STO expiration dates at any given time, not 
counting monthly or quarterly expirations.\7\ Specifically, on any 
Thursday or Friday that is a business day, the Exchange may list STOs 
in designated option classes that expire at the close of business on 
each of the next five consecutive Fridays that are business days.\8\ 
These STOs, which can be several weeks or more from expiration, may be 
listed in strike price intervals of $0.50, $1, or $2.50, with the finer 
strike price intervals being offered for lower priced securities, and 
for options that trade in the Exchange's dollar strike program.\9\ More 
specifically, the Exchange may list short term options in $0.50 
intervals for strike prices less than $75, or for option classes that 
trade in one dollar increments in the related non-short term option, $1 
intervals for strike prices that are between $75 and $150, and $2.50 
intervals for strike prices above $150.\10\
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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).
    \5\ See Commentary .11(a) to Rule 1012.
    \6\ See Rule 1101A(b)(vi)(A).
    \7\ See Commentary .11 to Rule 1012; Rule 1101A(b)(vi).
    \8\ Id.
    \9\ See Commentary .11 to Rule 1012; Rule 1101A(b)(vi).
    \10\ Id. See Commentary .11(e) to Rule 1012; Rule 
1101A(b)(vi)(E). The $2.50 interval does not apply to indexes. See 
Rule 1101A(b)(vi).
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    The Exchange recently proposed a change to the STO Program in 
Commentary .11(e) to Rule 1012 regarding non-index options and Rule 
1101A(b)(vi)(E) regarding index options that allows related non-STO 
series to be opened during the month prior to expiration of such non-
STO series in the same manner and strike price intervals as permitted 
for STOs.\11\ Thus, the Prior Month Filing would allow standard monthly 
expiration options to trade--a month prior to expiration--in the same 
intervals as the weekly expiration STO. The Exchange does not propose 
any substantive changes, but only ensures that the language within Rule 
1012 and Rule 1101A, respectively, is in conformity in respect of the 
interval that STOs and non-STOs may trade in during the month prior to 
expiration of the non-STOs.
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    \11\ See Securities Exchange Act Release No. 72504 (July 1, 
2014), 79 FR 38628 (July 8, 2014) (SR-Phlx-2014-41) (notice of 
filing and immediate effectiveness) (the ``Prior Month Filing''). 
For STO strike price intervals, see supra note 10 and related text.
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    Commentary .05(a)(vii) to Rule 1012 and Rule 1101A(a) now state 
that notwithstanding any other provision regarding strike prices in the 
respective rules, related non-STO series may be opened during the week 
prior to expiration of such non-STO series in the same manner and 
strike price intervals as permitted for STOs. This proposal conforms 
subsections Commentary .05(a)(vii) to Rule 1012 and Rule 1101A(a). 
Specifically, as proposed Commentary .05(a)(vii) to Rule 1012 and Rule 
1101A(a) would state that notwithstanding any other provision regarding 
strike prices in this rule, non-STOs that are on a class or an index 
class that has been selected to participate in the STO Program (related 
non-STO series) shall be opened during the month prior to expiration of 
such related non-STO series in the same manner and intervals as 
permitted in Commentary .11 to Rule 1012 or Rule 1101A(b)(vi).\12\ No 
other changes are proposed.
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    \12\ See Commentary .05(a)(vii) to Rule 1012 and Rule 1101A(A).
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    The Exchange is now permitted to list the standard monthly 
expiration contract options in these narrower STO intervals at any time 
during the month prior to expiration, which begins on the first trading 
day after the prior month's expiration date, subject to the provisions 
of Exchange rules. As discussed, this proposal simply conforms the 
language of Rules 1012 and 1101A to make each of the rules internally 
consistent.
    The Exchange believes that continuing to introduce consistent 
strike price intervals for STOs and related non-STOs during the month 
prior to expiration benefits investors by giving them more flexibility 
to closely tailor their investment decisions. The Exchange also 
believes that this provides the investing public and other market 
participants with additional opportunities to hedge their investments, 
thus allowing these investors to better manage their risk exposure.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder that are applicable to a national securities exchange, and, 
in particular, with the requirements of Section 6(b) of the Act.\13\ In 
particular, the proposal is consistent with Section 6(b)(5) of the 
Act,\14\ because it 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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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    As noted above, standard expiration options currently trade in 
wider intervals than their weekly counterparts, except during the week 
prior to expiration. This creates a situation where contracts on the 
same option class that expire both several weeks before and several 
weeks after the standard expiration are eligible to trade in strike 
price intervals that the standard expiration contract is not. The Prior 
Month Filing allowed STOs and non-STOs to be listed and traded in the 
same intervals pursuant to Rule 1012 (non-index options) and Rule 1101A 
(index options). This proposal conforms

[[Page 47511]]

the language of each of the respective rules to reflect the monthly 
time period, and negates potential confusion from inconsistent 
language.\15\
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    \15\ The Exchange represents that, because of the technical 
conforming nature of the proposal, it will not have any impact on 
system capacity.
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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 proposed technical conforming rule change 
continues to provide 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:
    (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) \16\ of the Act and 
Rule 19b-4(f)(6) \17\ thereunder.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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 \18\ 
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,\19\ 
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 that the Commission waive the 30-day 
operative delay so that the proposal may become operative immediately 
upon filing. The Exchange believes that waiver of the 30-day operative 
delay is in the public interest and consistent with the protection of 
investors because the proposed rule change is designed to harmonize its 
rules so that its rules are internally consistent. According to the 
Exchange, waiver of the 30-day operative delay would allow these 
changes to take effect immediately and therefore would avoid any 
potential investor confusion.
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    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 17 CFR 240.19b-4(f)(6)(iii).
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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 
because waiver will clarify the exchanges rules immediately, which 
could prevent investor confusion with respect to the rules of the 
Exchange. The Commission hereby waives the 30-day operative delay and 
designates the proposed rule change to be operative upon filing with 
the Commission.\20\
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    \20\ 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-2014-53 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2014-53. 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 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-2014-53, 
and should be submitted on or before September 3, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-19095 Filed 8-12-14; 8:45 am]
BILLING CODE 8011-01-P