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Notice

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Chapter VII, Section 6 of the Rules of the NASDAQ Options Market To Permit the Exchange To Establish Wider Bid/Ask Differentials for Certain Options With High Premiums or Other Special Characteristics

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Start Preamble August 22, 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 August 19, 2013 The NASDAQ Stock Market LLC (“NASDAQ” or the “Exchange”) filed with the Securities and Exchange Commission (“Commission”) a proposed rule change as described in Items I, II and III 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.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

NASDAQ is proposing to amend Chapter VII, Section 6 (Market Maker Quotations) of the rules of the NASDAQ Options Market (“NOM”) to permit the Exchange to establish wider bid/ask differentials for certain options with Start Printed Page 53180high premiums or other special characteristics.

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 those 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 parts 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 Chapter VII, Section 6 of the rules of NOM to permit the Exchange to establish wider bid/ask differentials for certain options with high premiums or other special characteristics.

Currently, the spread on options on equities and index options must not exceed $5. For 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.[3]

In this filing, the Exchange seeks the capability to establish wider bid/ask differentials for options that have high premiums or other special characteristics. For high premium options, the current five dollar range can expose market makers to disproportionate risk in dealing with those issues thereby discouraging them from quoting in those instruments. As such, the Exchange proposes to be able to modify the bid/ask differential for one or more series or classes of options, as appropriate, in response to high differential prices, market conditions, or other special factors impacting a particular option, options series, or class of option.

The Exchange notes that this flexibility is already permitted by the rules of many other options exchanges.[4]

2. Statutory Basis

The proposed rule change is consistent with the Act and the rules and regulations thereunder, including the requirements of Section 6(b) of the Act.[5] In particular, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) [6] requirements that the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and to perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. Here, the proposal will allow the Exchange to adjust price differentials in a manner that encourages quoting and trading activity.

The Exchange believes that the proposed rule change will enhance competition because the Exchange will be able adjust bid/ask differentials in a manner similar to Phlx, CBOE, ISE, and NYSE [sic].

B. Self-Regulatory Organization's Statement on Burden on Competition

This proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. In this regard and as indicated above, the Exchange notes that the rule proposed here is already in use by other options exchanges.

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 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)(ii) of the Act [7] and subparagraph (f)(6) of Rule 19b-4 thereunder.[8]

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

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-2013-110. 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 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 Start Printed Page 53181submissions. You should submit only information that you wish to make available publicly.

All submissions should refer to File Number SR-NASDAQ-2013-110, and should be submitted on or before September 18, 2013.

Start Signature

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.9

Kevin M. O'Neill,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  See NOM Rule Chapter VII Section 6(d)(ii).

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4.  See Phlx Rule 1014(c)(i)(A)(1)(a); CBOE Rule 44.4(e); ISE Rule 803(b)(4); NYSE MKT Rule 925NY(b)(4)(E).

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7.  15 U.S.C. 78s(b)(3)(a)(ii).

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[FR Doc. 2013-20934 Filed 8-27-13; 8:45 am]

BILLING CODE 8011-01-P