
[Federal Register: July 2, 2009 (Volume 74, Number 126)]
[Notices]               
[Page 31782-31786]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02jy09-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60169; File No. SR-Phlx-2009-40]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Order 
Granting Accelerated Approval of a Proposed Rule Change as Modified by 
Amendment No. 1 Thereto Relating to Listing and Trading of Foreign 
Currency Options

June 24, 2009.

I. Introduction

    On May 8, 2008, NASDAQ OMX PHLX, Inc. (``Phlx'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend its rules relating to the listing and 
trading of U.S. dollar-settled foreign currency options (``FCOs''). On 
May 29, 2009, the Exchange filed Amendment No. 1 to the proposed rule 
change.\3\ The proposed rule change, as modified by Amendment No. 1, 
was published for comment in the Federal Register on June 8, 2009.\4\ 
The Commission received no comments on the proposal. This order 
approves the proposed rule change, as modified by

[[Page 31783]]

Amendment No. 1, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced and superseded the original filing 
in its entirety.
    \4\ See Securities Exchange Act Release No. 60021 (June 1, 
2009), 74 FR 27217 (``Notice'').
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II. Description of the Proposal

    In January 2007, the Exchange began listing and trading FCOs on the 
British pound and the Euro.\5\ In July 2007, the Exchange listed and 
began trading U.S. dollar-settled FCOs on the Australian dollar, 
Canadian dollar, Swiss franc, and Japanese yen.\6\ U.S. dollar-settled 
FCOs are currently traded electronically over the Exchange's options 
trading platform. The Exchange no longer trades physical delivery 
options on foreign currencies.\7\
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    \5\ See Securities Exchange Act Release No. 54989 (December 21, 
2006), 71 FR 78506 (December 29, 2006) (SR-Phlx-2006-34). In 
approving the listing and trading of U.S. dollar-settled FCOs on the 
British pound and the Euro, the approval order noted that the 
listing and trading of additional U.S. dollar-settled FCOs on other 
foreign currencies will require the Exchange to file additional 
proposed rule changes on Form 19b-4.
    \6\ See Securities Exchange Act Release No. 56034 (July 10, 
2007), 72 FR 38853 (July 16, 2007) (SR-Phlx-2007-34).
    \7\ Physical delivery options, so named because settlement could 
involve delivery of the underlying currency (as opposed to cash for 
U.S. dollar-settled FCOs), traded on the Exchange since 1982 but 
since March 2007 are no longer listed and traded on the Exchange.
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    The Exchange now proposes to amend its rules to enable it to list 
and trade options on ten new currencies: the Mexican peso, the 
Brazilian real, the Chinese yuan,\8\ the Danish krone, the New Zealand 
dollar, the Norwegian krone, the Russian ruble, the South African rand, 
the South Korean won, and the Swedish krona \9\ (the ``New 
Currencies'').\10\ FCOs on the New Currencies would be listed and 
traded similarly to other U.S. dollar-settled FCOs that currently are 
listed and traded on the Exchange,\11\ and also would be traded 
electronically over the Exchange's options trading platform. FCOs on 
the New Currencies will be subject to existing Exchange rules and 
processes that now apply to existing FCOs traded on the Exchange, as 
proposed to be modified by the Exchange in its proposal.
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    \8\ The Exchange noted that the Chinese yuan may also be 
referred to as ``renminbi'' (similar to the British pound and 
sterling). See Notice, supra note 4, at note 4.
    \9\ The Exchange notes that CME Group Inc. (``CME''), formerly 
Chicago Mercantile Exchange Holdings Inc., lists and trades futures 
contracts on many of the New Currencies that are proposed to be 
listed and traded by the Exchange (e.g., the Mexican peso, the New 
Zealand dollar, the Norwegian krone, the Russian ruble, the Swedish 
krona, the Brazilian real, the Chinese renminbi, the South African 
rand, and the South Korean won). See Notice, supra note 4, at note 
12.
    \10\ Options on the following U.S. dollar-settled foreign 
currencies are currently listed and traded on the Exchange: the 
Australian dollar, the Euro, the British pound, the Canadian dollar, 
the Swiss franc, and the Japanese yen.
    \11\ See Securities Exchange Act Release Nos. 54989 (December 
21, 2006), 71 FR 78506 (December 29, 2006) (SR-Phlx-2006-34); and 
56034 (July 10, 2007), 72 FR 38853 (July 16, 2007) (SR-Phlx-2007-
34). See also supra notes 5 and 6 (citing to the approval orders for 
the existing Phlx FCOs).
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    In addition, the Exchange also proposed several modifications to 
its FCOs generally, including: Changing the uniform pricing convention 
methodology for FCOs, establishing new position and exercise limits for 
FCOs, amending certain existing Exchange rule definitions regarding 
FCOs, and deleting obsolete references regarding foreign currency 
products and processes. The Exchange has proposed conforming rule text 
changes as well as changes to Phlx Option Floor Procedure Advices 
(``OFPAs'') \12\ to harmonize Exchange OFPAs with Exchange rules.
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    \12\ See proposed changes to Option Floor Procedure Advices B-7 
(Time Priority of Bids/Offers in Foreign Currency Options (Physical 
Delivery Foreign Currency Option Only)), C-2 (Options Floor Broker 
Management System), F-6 (Options Quote Parameters), F-17 (FCO Trades 
to be Effected in the Pit (Physical Delivery Foreign Currency Option 
Only)), F-18 (FCO Expiration Months and Strike Prices--Selective 
Quoting Facility (Physical Delivery Foreign Currency Option Only)), 
and F-20 (Quoting and Trading Customized Foreign Currency Options 
(Foreign Currency Option Only)).
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Pricing of FCOs

    The Exchange proposes to modify the convention of how it prices 
FCOs. Currently, Rule 1012, Commentary .06 provides that the Exchange 
may initially list exercise strike prices in the following format, 
e.g.: the Euro in the range of $.9500 (expressed as $95) to $1.0550 
(expressed as $105.50). In other words, options on foreign currencies 
are currently priced without the application of an up-front multiplier 
and are followed by an ``expressed as'' price. The Exchange proposes to 
amend Commentary .06 to align its pricing practice in a way that better 
reflects how options are actually priced by applying a designated up-
front modifier to the price. As such, the Exchange will no longer need 
to follow FCO prices of several decimal places with ``expressed as'' 
prices. The Exchange's proposed changes regarding the methodology and 
convention of pricing options on foreign currencies is similar to the 
pricing convention used by other markets that trade currency 
options.\13\
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    \13\ The International Securities Exchange, LLC (``ISE''), for 
example, also lists and trades options on certain foreign currencies 
(including, for example, the Australian dollar, the Euro, the 
British pound, the Canadian dollar, the Swiss franc, and the 
Japanese yen) that are not fungible with Phlx's U.S. dollar-settled 
FCOs. See Securities Exchange Act Release No. 55575 (April 3, 2007), 
72 FR 17963 (April 10, 2007) (SR-ISE-2006-59). ISE, like Phlx's 
proposal, applies up-front multipliers to currency spot prices so 
that ISE's currency prices tend to look like the prices of index and 
other options.
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    To accomplish these changes, the Exchange proposes to modify the 
definition of Spot Price in Phlx Rule 1000(b)(16) by renaming it 
``Exchange Spot Price'' and indicating that, to establish the Exchange 
Spot Price, the Exchange will apply an appropriate multiplier to the 
cash market spot price that it receives from a price quotation 
dissemination system chosen by the Exchange.\14\ The multipliers will 
be applied by the Exchange so that Exchange Spot Prices would be 
similar to index option prices.\15\ The up-front application of 
appropriate multipliers to cash market spot prices to get Exchange Spot 
Prices more accurately reflects how options on foreign currencies are 
actually priced on exchanges that list and trade such products. To 
effectuate this change, the Exchange proposes to amend Rules 1012, 
1014, 1033, 1034, and 1092, and OFPA F-6 to clarify the new uniform FCO 
pricing convention. The Exchange also proposes to amend its rules to 
reflect that the Exchange Spot Price will be the settlement price for 
its FCOs.\16\
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    \14\ See Securities Exchange Act Release No. 58915 (November 6, 
2008), 73 FR 67916 (November 17, 2008) (SR-Phlx-2008-68) 
(indicating, among other things, that Quote Media, Inc. provides 
spot prices to The NASDAQ OMX Group, Inc. (``NASDAQ OMX'')). 
Proposed Rule 1000(b)(16) provides: ``The term `Exchange Spot Price' 
in respect of an option contract on a foreign currency means the 
cash market spot price, for the sale of one foreign currency for 
another, quoted by various foreign exchange participants for the 
sale of a single unit of such foreign currency for immediate 
delivery that is calculated from the foreign currency price 
quotation reported by the foreign currency price quotation 
dissemination system selected by the Exchange, to which an 
appropriate multiplier is applied. The multiplier(s) will be: 100 
for the British pound, the Euro, the Swiss Franc, the Canadian 
dollar, the Australian dollar, the Brazilian real, and the New 
Zealand dollar; 1,000 for the Chinese yuan, the Danish krone, the 
Mexican peso, the Norwegian krone, the South African rand, and the 
Swedish krona; 10,000 for the Japanese yen and the Russian ruble; 
and 100,000 for the South Korean won.''
    \15\ Exchange Spot Prices will generally have two decimal 
places. As an example, the Exchange Spot Price for the Japanese yen, 
with up-front application of a multiplier of 10,000, may be 80.22--
which reflects how index (and other) options are operationally 
priced by the Exchange, ISE, and other markets that trade options on 
foreign currencies. In contrast, using the old pricing methodology 
(without the up-front application of a multiplier) the above-noted 
spot price for the Japanese yen would be .008022 (expressed as 
80.22). Moreover, Exchange Spot Prices and what are known as 
modified spot prices (that is, spot prices that do not incorporate 
modifiers but add them at a later time) are the same values. See 
Securities Exchange Act Release No. 57575 (March 28, 2008), 73 FR 
18310 (April 3, 2008) (SR-Phlx-2008-06) (describing, among other 
things, modified spot prices).
    \16\ The closing settlement value for the Phlx FCOs will 
continue to be spot price (now the ``Exchange Spot Price'') at 
12:00:00 Eastern Time (noon) on the last trading day prior to 
expiration unless the Exchange determines to apply an alternative 
closing settlement value as a result of extraordinary circumstances.

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[[Page 31784]]

    The Exchange will continue to disseminate FCO-related data 
including the settlement values and Exchange Spot Prices for its FCOs 
over the facilities of a major public data vendor, such as NASDAQ OMX 
or one or more other (NASDAQ OMX-owned or unrelated) major market data 
vendors.\17\
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    \17\ See Securities Exchange Act Release No. 59611 (March 20, 
2009), 74 FR 13498 (March 27, 2009) (SR-Phlx-2009-22) at note 10.
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    The Exchange also proposes to delete rule text that reflects the 
prior methodology. For example, the Exchange proposes to amend Rule 
1014 to reflect the revised uniform FCO pricing that no longer requires 
indicating bid/ask prices ``expressed as'' a modified value, after 
appropriate multipliers are applied.\18\ Phlx also would amend Rule 
1033, which applies to all currencies, to clarify that premiums on all 
U.S. dollar-settled FCOs will be calculated in the same way for all 
FCOs. Similarly, the Exchange proposes to delete unnecessary rule text 
that indicates that the first two decimal places will be omitted for 
bid and offer quotations for the British pound, the Swiss franc, the 
Canadian dollar, the Australian dollar, and the Euro, and the first 
four decimal places will be omitted from bid and offer quotations for 
the Japanese yen.\19\ For example, under the proposal, a bid of 
``3.25'' for a premium on a $170 strike price option on the British 
pound would represent a bid to pay $325 per option contract. Further, 
the Exchange will clarify that minimum price increments for all FCOs 
will remain at $.01, but without the need to indicate different minimum 
price increments for different currencies that are thereafter each 
``expressed as $.01''.
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    \18\ Additionally, Rule 1092 and OFPA F-6 would be amended to 
clarify that option prices will no longer be represented in terms of 
several decimal places that are then expressed as different values.
    \19\ Rule 1033 currently states that the first two decimal 
places shall be omitted from all bid and offer quotations for the 
British pound, the Swiss franc, the Canadian dollar, the Australian 
dollar, and the Euro, and the first four decimal places shall be 
omitted from all bid and offer quotations for the Japanese yen 
(e.g., a bid of ``9.2'' for an option contract on the British pound 
shall represent a bid to pay $.0920 per unit of underlying foreign 
currency--i.e., a premium of $2,875--for an option contract having a 
unit of trading of 31,250 pounds; a bid of .44 for an option 
contract on the Euro shall represent a bid to pay .0044 per unit of 
underlying foreign currency--i.e., a premium of $275--for an option 
contract having a unit of trading of 62,500 Euros; a bid of ``1.6'' 
for an option contract on the Japanese yen shall represent a bid to 
pay $.000160 per unit of underlying foreign currency--i.e., a 
premium of $1,000--for an option contract having a unit of trading 
of 6,250,000 yen).
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    Additionally, the Exchange proposes to modify Rule 1012, Commentary 
.06 to specify that Exchange Strike Prices may be listed within a 40 
percent band (20 percent above and 20 percent below) around Exchange 
Spot Prices at fifty cent ($.50) intervals. This would result in no 
more than eighty-one strike prices available for trading.\20\ The 
Exchange also proposes to amend Rule 1012 to permit the Exchange to 
list, with respect to any U.S. dollar-settled FCOs, options having up 
to ten options series with expirations up to thirty-six months.\21\ The 
Exchange proposes to establish that FLEX currency options will 
similarly have expiration dates of up to three years.\22\
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    \20\ The Exchange could initially list exercise strike prices 
for each expiration of U.S. dollar-settled options on currencies 
within a 40 percent band around the current Exchange Spot Price at 
fifty cent ($.50) intervals. Thus, if the Exchange Spot Price of the 
Euro were at $100.00, the Exchange would list strikes in $.50 
intervals up to $120.00 and down to $80, for a total of eighty-one 
strike prices available for trading. As the Exchange Spot Price for 
U.S. dollar-settled FCOs moves, the Exchange will list new strike 
prices that, at the time of listing, do not exceed the Exchange Spot 
Price by more than 20 percent and are not less than the Exchange 
Spot Price by more than 20 percent. For example, if at the time of 
initial listing, the Exchange Spot Price of the Euro is at $100.00, 
the strike prices the Exchange will list will be $80.00 to $120.00. 
If the Exchange Spot Price then moves to $105.00, the Exchange may 
list additional strikes at the following prices: $105.50 to $126.00.
    \21\ Proposed Rule 1012(a)(iii)(C) provides: ``The Exchange may 
list, with respect to any U.S. dollar-settled foreign currencies, 
options having up to three years from the time they are listed until 
expiration. There may be up to ten options series, options having up 
to thirty-six months from the time they are listed until expiration. 
There may be up to six additional expiration months. Strike price 
interval, bid/ask differential and continuity rules shall not apply 
to such options series until the time to expiration is less than 
nine months.''
    \22\ See proposed Rule 1079(a)(6).
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    Closing settlement values are addressed in Rule 1057 and 1079 (for 
FLEX options). In both rules, the closing settlement price for U.S. 
dollar-settled FCOs is the Spot Price at 12:00:00 (noon) Eastern Time 
on the last trading day prior to expiration.\23\ Phlx proposes to amend 
Rules 1057 and 1079 to reflect the new pricing convention it has 
proposed. Specifically, Rules 1057 and 1079 would be amended to add the 
New Currencies and reflect that the Exchange Spot Price per Rule 
1000(b)(16) would be the settlement price.\24\
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    \23\ The closing settlement value was changed from the Noon 
Buying Rate received from the Federal Reserve Bank of New York to 
the spot price at 12:00:00 Eastern Time (noon) on the last trading 
day prior to expiration. See Securities Exchange Act Release No. 
58915 (November 6, 2008), 73 FR 67916 (November 17, 2008) (SR-Phlx-
2008-68). See also supra note 14 (regarding the vendor used for spot 
prices).
    \24\ Proposed Rule 1057 provides that: ``The closing settlement 
value for the U.S. dollar-settled FCO on the Australian dollar, the 
Euro, the British pound, the Canadian dollar, the Swiss franc, the 
Japanese yen, the Mexican peso, the Brazilian real, the Chinese 
yuan, the Danish krone, the New Zealand dollar, the Norwegian krone, 
the Russian ruble, the South African rand, the South Korean won, and 
the Swedish krona shall be the Exchange Spot Price at 12:00:00 
Eastern Time (noon) on the last trading day prior to expiration 
unless the Exchange determines to apply an alternative closing 
settlement value as a result of extraordinary circumstances.'' See 
also proposed Rule 1079 (concerning FLEX options).
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Position Limits

    Rule 1001 generally establishes position limits for FCOs at 200,000 
on the same side of the market relating to the same underlying 
currency.\25\ The Exchange proposes to amend Rule 1001 to establish 
three levels of position limits for FCOs. Specifically, the Exchange 
proposes the following position limits: (i) 300,000 contracts for 
options on: the Mexican peso, the Brazilian real, the Chinese yuan, the 
Danish krone, the Norwegian krone, the Russian ruble, the South African 
rand, the South Korean won, the Swedish krona; (ii) 600,000 contracts 
for options on: the British pound, the Swiss franc, the Canadian 
dollar, the Australian dollar, the Japanese yen, and the New Zealand 
dollar; and (iii) 1,200,000 contracts for options on the Euro.\26\
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    \25\ Rule 1001 currently sets forth position limits of 100,000 
contracts for options on the Mexican peso traded as a customized 
option per Rule 1069. Because Rule 1069 and other references to 
customized options, among them options on the Mexican peso, are 
proposed to be deleted in this filing, the 100,000 contract position 
limit on the Mexican peso is proposed to be deleted.
    \26\ See proposed Commentary .05(b) to Rule 1001.
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    The Exchange also proposes to eliminate from Rules 1001 and 1079 
the practice of fractional counting of U.S. dollar-settled FCO 
contracts for position limit purposes. Fractional counting was needed 
to establish position limit equivalency between the Exchange's physical 
delivery option contracts and U.S. dollar-settled option contracts, 
which had different sized contracts on the same underlying currencies, 
but is no longer required as the Exchange no longer trades physical 
delivery options on foreign currencies.

Systems Capacity and Surveillance

    The New Currencies would be covered under the Exchange's existing 
surveillance programs.\27\ Specifically, the Exchange represented that 
it has the

[[Page 31785]]

necessary systems capacity to support new options series that will 
result from the introduction of options on the New Currencies.\28\ The 
Exchange further represented that it has an adequate surveillance 
program in place for trading U.S. dollar-settled FCOs and that it will 
apply the same surveillance program to the New Currencies.\29\
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    \27\ The Exchange noted that it is a member of the Intermarket 
Surveillance Group (``ISG'') and may obtain trading information via 
the ISG from other exchanges who are members or affiliates of the 
ISG. The members of the ISG include all of the U.S. registered stock 
and options markets. The ISG members work together to coordinate 
surveillance and investigative information sharing in the stock and 
options markets. In addition, the major futures exchanges are 
affiliated members of the ISG, which allows for the sharing of 
surveillance information for potential intermarket trading abuses. 
See Notice, supra note 4, at note 33.
    \28\ See Notice, supra note 4, at 74 FR 27220.
    \29\ See id.
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Other Conforming Changes

    The Exchange proposes other conforming changes to its rules to 
accommodate the New Currencies. For example, the Exchange proposes to 
add the ten New Currencies to the six currencies that are currently 
listed in Rule 1000.\30\ The Exchange also proposes technical changes 
to delete obsolete references, rules, and OFPAs regarding foreign 
currency products and processes. These include references to cross-
rate, physical delivery, and customized foreign currency options; 
currency and currency index warrants; currency products that are no 
longer traded; and the Regulatory Services Post, which no longer 
exists.\31\
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    \30\ The Exchange will similarly add the New Currencies 
throughout its rules. See, e.g., Rules 1009, 1057, and 1079.
    \31\ See, e.g., Rules 1000 Sections 14, 15, 21, 38, and 40; 
1001, 1002, 1009, 1034, and 1069 (cross-rate foreign currency 
options); 1012, 1014, 1016, 1034, 1044, and 1063 (physical delivery 
foreign currency options); 1001, 1009, 1033, 1034, 1063, 1069, and 
1079 (customized foreign currency options); 1049, 1070 and 1089 
(currency warrants); and 1079 (Regulatory Services Post). See also 
OFPAs B-7, F-17, and F-18 (physical delivery foreign currency 
options); and C-2 and F-20 (customized foreign currency options). 
See also Rule 1014 correcting typographical errors.
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\32\ In particular, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\33\ which 
requires, among other things, that the rules of a national securities 
exchange be 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.
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    \32\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \33\ 15 U.S.C. 78f(b)(5).
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    With respect to the listing and trading of FCOs on the proposed New 
Currencies, the Commission believes that the proposal may provide 
investors with additional strategic investment and hedging tools. The 
Commission notes that the currency market for each proposed New 
Currency is highly liquid and is characterized by a significant degree 
of volume and turnover. As a result, the Commission believes that 
sufficient venues exist to provide investors with ready access to 
reliable information on the New Currencies so that investors in FCOs 
can monitor the underlying spot market in the currencies. In addition, 
investors will be able to obtain information regarding futures trading 
on most of the New Currencies.\34\ Further, the Commission notes that 
the Exchange's proposal is designed to ensure that the New Currencies 
are listed and traded under the same terms that apply to other U.S. 
dollar-settled FCOs that are currently traded on the Exchange, as such 
terms are proposed to be amended by the Exchange in this filing.
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    \34\ See supra note 9 (noting that CME lists and trades futures 
contracts on most of the New Currencies (e.g., the Mexican peso, the 
New Zealand dollar, the Norwegian krone, the Russian ruble, the 
Swedish krona, the Brazilian real, the Chinese renminbi, the South 
African rand, and the South Korean won)).
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    The Commission further believes that the Exchange's proposal to 
modify the methodology of pricing options on foreign currencies is 
consistent with the Act. The proposed new methodology clarifies and 
greatly simplifies the pricing of FCOs on Phlx in that it eliminates 
the need to express the price of options on foreign currencies with an 
``expressed as'' price. The Exchange's proposal to apply an appropriate 
up-front multiplier to the cash market spot prices it receives from a 
price quotation dissemination system to establish the Exchange Spot 
Price for FCOs is consistent with the Act and also is consistent with 
the pricing convention used by other markets that trade foreign 
currency options.\35\ The new methodology should result in more uniform 
pricing between FCOs and other option products that trade on the 
Exchange. The use of the Exchange Spot Price will therefore bring the 
underlying value of a Phlx FCO up to a level that more closely 
resembles the value an investor would expect to see for other options 
traded on the Exchange. Investors will be able to access a list of the 
modifiers that are used in creating each of the modified exchange 
rates.\36\ In addition, the Exchange will continue to disseminate 
Exchange Spot Prices and other FCO-related data throughout the day over 
the facilities of a major public data vendor to inform investors' 
trading of FCOs.
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    \35\ See supra note 13 (discussing ISE's FCOs).
    \36\ See supra note 14 (describing the modifiers set forth in 
proposed Rule 1000(b)(16)).
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    Further, the Commission believes that the proposals permitting 
Exchange Strike Prices to be listed within a 40 percent band around 
Exchange Spot Prices at fifty cent internals; clarifying that premiums 
on all U.S. dollar-settled FCOs will be calculated in the same way for 
all options; and clarifying that minimum price increments for all 
currencies will remain at $.01, are all consistent with the Act. 
Permitting Strike Prices to be listed within a 40 percent band around 
the Exchange Spot Price allows accurate pricing of options on foreign 
currencies, and amending the rules to ensure that premiums and minimum 
price increments will be the same for all FCOs perfects the mechanism 
of a free and open market by simplifying the Exchange's rules and 
implementing rules that are consistent across all options on foreign 
currencies.
    The Commission believes that the Exchange's proposal to institute 
three levels of position limits for FCOs on the same side of the market 
relating to the same underlying currency is reasonably designed to 
protect the options and related markets from disruptions or 
manipulation, and imposes similar position limits to those that have 
been adopted by other markets that trade foreign currency options as 
such have been approved previously by the Commission.\37\ Further, the 
elimination of fractional counting differentiations for position limit 
purposes is appropriate, because physical delivery foreign currency 
options are no longer traded on the Exchange. Accordingly, the 
Commission believes that the proposed changes to the position limit 
rule are appropriate and consistent with the Act.
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    \37\ See Securities Exchange Act Release No. 55575 (April 3, 
2007), 72 FR 17963 (April 10, 2007) (SR-ISE-2006-59).
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    In approving the proposed rule change, the Commission has relied 
upon the Exchange's representations that it has the necessary systems 
capacity and adequate surveillance programs in place to support new 
options series that will result from this proposal.
    The Commission believes that the other rule changes proposed by the 
Exchange to delete obsolete and outdated rules and OFPAs regarding 
foreign currency products and processes to eliminate confusion and 
extraneous references are consistent with the Act and should permit the 
Exchange to

[[Page 31786]]

update its rules applicable to FCOs and thereby facilitate its ability 
to administer its FCO program.

IV. Accelerated Approval

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\38\ for approving the proposed rule change, as amended, prior 
to the thirtieth day after publication of the Notice in the Federal 
Register. The Commission notes that the proposal, as modified by 
Amendment No. 1, was published for a 15-day comment period,\39\ and 
that it did not receive any comment letters on the proposal. The 
Commission notes that the proposal, as modified by Amendment No. 1, 
extends to the New Currencies the same rule set that currently is 
applicable to FCOs traded on the Exchange, as proposed to be amended by 
the current filing. The proposal is similar to another exchange's FCO 
program, including most of the proposed New Currencies, the position 
limits, and the up-front modified spot price, and so does not raise 
additional issues that have not been considered previously by the 
Commission.\40\ Accordingly, the Commission finds that the proposed 
rule change does not raise any novel regulatory issues and believes 
that accelerating approval of this proposal at the conclusion of a 15-
day comment period should benefit investors by offering them the 
ability to invest in FCOs based on the New Currencies and by offering 
the new FCO features, methodologies, and processes without further 
delay. In particular, the proposal should greatly simplify the pricing 
methodology and structure of Phlx's FCOs with respect to, among other 
things, strike, bid and ask, spot and settlement prices, and should 
consequently facilitate the ability of investors to more readily 
understand and trade these products.
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    \38\ 15 U.S.C. 78s(b)(2).
    \39\ See Notice, supra note 4.
    \40\ See supra note 37 (citing to the approval order for SR-ISE-
2006-59).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\41\ that the proposed rule change (SR-Phlx-2009-40), as modified 
by Amendment No. 1, be, and it hereby is, approved on an accelerated 
basis.
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    \41\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\42\
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    \42\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-15611 Filed 7-1-09; 8:45 am]

BILLING CODE 8010-01-P
