Self-Regulatory Organizations; The NASDAQ Stock Market LLC ; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Extension of the Exchange's Penny Pilot Program and Replacement of Penny Pilot Issues That Have Been Delisted Citation: "78 FR 77530" Document Number: "Release No. 34-71105; File No. SR-NASDAQ-2013-154" Page Number : "77530" "Notices" December 17, 2013. 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 December 13, 2013 , The NASDAQ Stock Market LLC ("NASDAQ" 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 NASDAQ. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. FOOTNOTE 1 15 U.S.C. 78s(b)(1). END FOOTNOTE FOOTNOTE 2 17 CFR 240.19b-4. END FOOTNOTE I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NASDAQ is filing with the Commission a proposal to amend Chapter VI, Section 5 (Minimum Increments) of the rules of the NASDAQ Options Market ("NOM") to extend through June 30, 2014 , the Penny Pilot Program in options classes in certain issues ("Penny Pilot" or "Pilot"), and to change the date when delisted classes may be replaced in the Penny Pilot. /3/ FOOTNOTE 3 The Penny Pilot was established in March 2008 and was last extended in June 2013 . See Securities Exchange Act Release Nos. 57579 ( March 28, 2008 ), 73 FR 18587 ( April 4, 2008 ) (SR-NASDAQ-2008-026) (notice of filing and immediate effectiveness establishing Penny Pilot); and 69787 ( June 18, 2013 ), 78 FR 37858 ( June 24, 2013 ) (SR-NASDAQ-2013-082) (notice of filing and immediate effectiveness extending the Penny Pilot through December 31, 2013 ). END FOOTNOTE The Exchange requests that the Commission waive the 30-day operative delay period to the extent needed for timely industry-wide implementation of the proposal. The text of the amended Exchange rule is set forth immediately below. Proposed new language is italicized and proposed deleted language is [bracketed]. NASDAQ Stock Market Rules Options Rules * * * * * Chapter VI Trading Systems * * * * * Sec. 5 Minimum Increments (a) The Board may establish minimum quoting increments for options contracts traded on NOM. Such minimum increments established by the Board will be designated as a stated policy, practice, or interpretation with respect to the administration of this Section within the meaning of Section 19 of the Exchange Act and will be filed with the SEC as a rule change for effectiveness upon filing. Until such time as the Board makes a change in the increments, the following principles shall apply: (1)-(2) No Change. (3) For a pilot period scheduled to expire on [ December 31, 2013 ] June 30, 2014 , if the options series is trading pursuant to the Penny Pilot program one (1) cent if the options series is trading at less than $3.00 , five (5) cents if the options series is trading at $3.00 or higher, unless for QQQQs, SPY and IWM where the minimum quoting increment will be one cent for all series regardless of price. A list of such options shall be communicated to membership via an Options Trader Alert ("OTA") posted on the Exchange's Web site. The Exchange may replace any pilot issues that have been delisted with the next most actively traded multiply listed options classes that are not yet included in the pilot, based on trading activity in the previous six months. The replacement issues may be added to the pilot on the second trading day following [ July 1, 2013 ] January 1, 2014 . (4) No Change. (b) No Change. * * * * * The text of the proposed rule change is available from NASDAQ's Web site at http://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 1. Purpose The purpose of this filing is to amend Chapter VI, Section 5 to extend the Penny Pilot through June 30, 2014 , and to change the date when delisted classes may be replaced in the Penny Pilot. Under the Penny Pilot, the minimum price variation for all participating options classes, except for the Nasdaq-100 Index Tracking Stock ("QQQQ"), the SPDR S&P 500 Exchange Traded Fund ("SPY") and the iShares Russell 2000 Index Fund ("IWM"), is $0.01 for all quotations in options series that are quoted at less than $3 per contract and $0.05 for all quotations in options series that are quoted at $3 per contract or greater. QQQQ, SPY and IWM are quoted in $0.01 increments for all options series. The Penny Pilot is currently scheduled to expire on December 31, 2013 . The Exchange proposes to extend the time period of the Penny Pilot through June 30, 2014 , and to provide revised dates for adding replacement issues to the Penny Pilot. The Exchange proposes that any Penny Pilot Program issues that have been delisted may be replaced on the second trading day following January 1, 2014 . The replacement issues will be selected based on trading activity in the previous six months. /4/ FOOTNOTE 4 The replacement issues will be announced to the Exchange's membership via an Options Trader Alert (OTA) posted on the Exchange's Web site. The Exchange proposes in its Penny Pilot rule that replacement issues will be selected based on trading activity in the previous six months. The replacement issues would be identified based on The Option Clearing Corporation's trading volume data from June 1, 2013 through November 30, 2013 . The month immediately preceding the replacement issues' addition to the Pilot Program (i.e. December) would not be used for purposes of the six-month analysis. END FOOTNOTE This filing does not propose any substantive changes to the Penny Pilot Program; all classes currently participating in the Penny Pilot will remain the same and all minimum increments will remain unchanged. The Exchange believes the benefits to public customers and other market participants who will be able to express their true prices to buy and sell options have been demonstrated to outweigh the potential increase in quote traffic. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act /5/ in general, and furthers the objectives of Section 6(b)(5) of the Act /6/ 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 mechanism of a free and open market and a national market system. In particular, the proposed rule change, which extends the Penny Pilot for an additional six months through June 30, 2014 and changes the date for replacing Penny Pilot issues that were delisted to the second trading day following January 1, 2014 , will enable public customers and other market participants to express their true prices to buy and sell options for the benefit of all market participants. This is consistent with the Act. FOOTNOTE 5 15 U.S.C. 78f(b). END FOOTNOTE FOOTNOTE 6 15 U.S.C. 78f(b)(5). END FOOTNOTE 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 not necessary or appropriate in furtherance of the purposes of the Act. To the contrary, this proposal is pro-competitive because it allows Penny Pilot issues to continue trading on the Exchange. Moreover, the Exchange believes that the proposed rule change will allow for further analysis of the Pilot and a determination of how the Pilot should be structured in the future; and will serve to promote regulatory clarity and consistency, thereby reducing burdens on the marketplace and facilitating investor protection. The Pilot is an industry wide initiative supported by all other option exchanges. The Exchange believes that extending the Pilot will allow for continued competition between market participants on the Exchange trading similar products as their counterparts on other exchanges, while at the same time allowing the Exchange to continue to compete for order flow with other exchanges in option issues trading as part of the Pilot. 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 The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) /7/ of the Act and subparagraph (f)(6) of Rule 19b-4 thereunder. /8/ Because the 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)(iii) /9/ of the Act and subparagraph (f)(6) of Rule 19b-4 thereunder. /10/ FOOTNOTE 7 15 U.S.C. 78s(b)(3)(A)(iii). END FOOTNOTE FOOTNOTE 8 17 CFR 240.19b-4(f)(6). END FOOTNOTE FOOTNOTE 9 15 U.S.C. 78s(b)(3)(A)(iii). END FOOTNOTE FOOTNOTE 10 17 CFR 240.19b-4(f)(6). END FOOTNOTE A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative prior to 30 days after the date of the filing. /11/ However, pursuant to Rule 19b-4(f)(6)(iii), /12/ the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because doing so will allow the Pilot Program to continue without interruption in a manner that is consistent with the Commission's prior approval of the extension and expansion of the Pilot Program and will allow the Exchange and the Commission additional time to analyze the impact of the Pilot Program. /13/ Accordingly, the Commission designates the proposed rule change as operative upon filing with the Commission. /14/ FOOTNOTE 11 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 the 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 pre-filing requirement. END FOOTNOTE FOOTNOTE 12 17 CFR 240.19b-4(f)(6)(iii). END FOOTNOTE FOOTNOTE 13 See Securities Exchange Act Release No. 61061 ( November 24, 2009 ), 74 FR 62857 ( December 1, 2009 ) (SR-NYSEArca-2009-44). END FOOTNOTE FOOTNOTE 14 For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). END FOOTNOTE 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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) 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 * Use the Commission's Internet comment form ( http://www.sec.gov/rules/sro.shtml ); or * Send an email to firstname.lastname@example.org . Please include File Number SR-NASDAQ-2013-154 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-NASDAQ-2013-154. 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 NASDAQ. 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-2013-154 and should be submitted on or before January 13, 2014 . For the Commission, by the Division of Trading and Markets , pursuant to delegated authority. /15/ FOOTNOTE 15 17 CFR 200.30-3(a)(12). END FOOTNOTE Kevin M. O'Neill, Deputy Secretary. [FR Doc. 2013-30451 Filed 12-20-13; 8:45 am ] BILLING CODE 8011-01-P
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