Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 Start Printed Page 62485(“Act”), and Rule 19b-4 thereunder, 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.
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
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. 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.
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  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. 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.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section 6(b) of the Act  in general, and furthers the objectives of Section 6(b)(5) of the Act  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.
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  and Rule 19b-4(f)(6)  thereunder.
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:
- Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); orStart Printed Page 62486
- Send an e-mail to email@example.com. Please include File Number SR-NASDAQ-2011-136 on the subject line.
- 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.Start Signature
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10
Elizabeth M. Murphy,
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).Back to Citation
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.Back to Citation
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.Back to Citation
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.Back to Citation
[FR Doc. 2011-25957 Filed 10-6-11; 8:45 am]
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