Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Federal Register: June 17, 2010 (Volume 75, Number 116)
Notices
Page 34491-34493
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
DOCID:fr17jn10-117
SECURITIES AND EXCHANGE COMMISSION
Release No. 34-62269; File No. SR-Phlx-2010-82
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by NASDAQ OMX PHLX, Inc. Relating to Trading Halts in Options During a Trading Pause in the Underlying
Security
June 10, 2010.
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 June 10, 2010, NASDAQ OMX PHLX, Inc. (``Phlx'' or ``Exchange'') filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange has designated the proposed rule change as constituting a ``non- controversial'' rule change under paragraph (f)(6) of Rule 19b-4 under the Act,\3\ which renders the proposal effective upon receipt of this filing by the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 17 CFR 240.19b-4(f)(6).
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Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange proposes to amend Exchange Rule 1047, Trading
Rotations, Halts and Suspensions, to state that Trading on the Exchange in any option contract shall be halted whenever trading in the underlying security has been paused by the primary listing market.
Trading in such options contracts may be resumed upon a determination by the Exchange that the conditions that led to the pause are no
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longer present and that the interests of a fair and orderly market are best served by a resumption of trading, which in no circumstances will be before the Exchange has received notification that the underlying security has resumed trading on at least one exchange.
The text of the proposed rule change is available on the Exchange's
Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings, at the principal office of the Exchange, and at the Commission's Public
Reference Room.
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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.
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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 ensure that the
Exchange maintains fair and orderly markets in options upon the imposition of a single stock pause (``trading pause'') \4\ by the listing market for the underlying security. Accordingly, as proposed, if such a trading pause is imposed, it will be considered a halt on the primary market for the underlying security and a trading halt in the overlying option will be imposed.
\4\ The term ``trading pause'' is not defined in PHLX's Rules, but for example, see Securities Exchange Act Release No. 62129 (May 19, 2010), 75 FR 28839 (May 24, 2010) (SR-NASDAQ-2010-061); and
Securities Exchange Act Release No. 62124 (May 19, 2010), 75 FR 28828 (May 24, 2010) (SR-BX-2010-037).
Transactions that occur between the time the pause is imposed on the listing market and the halt is processed on PHLX will be nullified pursuant to PHLX Rule 1092(c)(iv)(B).\5\
\5\ PHLX Rule 1092(c)(iv)(B) states that, respecting equity options (including options overlying ETFs), trades on the Exchange will be nullified when the trade occurred during a trading halt on the primary market for the underlying security.
Trading in the affected option will resume upon a determination by the Exchange that the conditions that led to the pause are no longer present and that the interests of a fair and orderly market are best served by a resumption of trading, which in no circumstances will be before the Exchange has received notification that the underlying security has resumed trading on at least one exchange.
Orders in the affected option that are received during the halt on
PHLX will be treated as pre-opening orders and will be included in the re-opening process upon the resumption of trading on the listing market for the underlying security pursuant to PHLX Rule 1017(h).\6\
\6\ PHLX Rule 1017(h) states that the procedure described in the
Rule (Openings in
Options) may be used to reopen an option after a trading halt.
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Statutory Basis
The Exchange believes that its proposal is consistent with Section 6(b) of the Act \7\ in general, and furthers the objectives of Section 6(b)(5) of the Act \8\ in particular, in that it is designed to promote just and equitable principles of trade, 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.
Specifically, the Exchange believes that the proposal benefits customers by halting trading in options during times of uncertainty regarding the price of the underlying security due to a trading pause in such underlying security.
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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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.
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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.
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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, if consistent with the protection of investors and the public interest, it has become effective pursuant to Section 19(b)(3)(A) of the Act \9\ and
Rule 19b-4(f)(6) thereunder.\10\
\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) requires the self-regulatory organization to submit to the
Commission written notice of its 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.
The Exchange requested that the Commission waive the 30-day operative delay. The Exchange notes that such a waiver will permit it to immediately implement the proposed rule change in order to benefit customers by halting trading in options during times of uncertainty regarding the price of the underlying security due to a trading pause in such underlying security. The Commission approved filings from the exchanges and the Financial Industry Regulatory Authority to institute a single stock trading pause for equity securities that experience a 10% change in price during a five minute period.\11\ The Commission hereby grants the Exchange's request and believes such waiver is consistent with the protection of investors and the public interest.\12\ Accordingly, the Commission designates the proposed rule change operative upon filing with the Commission.
\11\ See Securities Exchange Act Release Nos. 62251 and 62252
(June 10, 2010).
\12\ For purposes only of waiving the 30-day operative delay of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15
U.S.C. 78c(f).
At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate 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.
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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 e-mail to rule-comments@sec.gov. Please include
File
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Number SR-Phlx-2010-82 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-2010-82. 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 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-2010-82 and should be submitted on or before July 8, 2010.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\13\
\13\ 17 CFR 200.30-3(a)(12).
Florence E. Harmon,
Deputy Secretary.
FR Doc. 2010-14603 Filed 6-16-10; 8:45 am
BILLING CODE 8010-01-P
