[Federal Register: July 18, 2008 (Volume 73, Number 139)]
[Notices]
[Page 41392-41394]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18jy08-127]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58130; File No. SR-NYSEArca-2008-72]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Relating to the
Exchange's Quarterly Options Series Pilot Program
July 9, 2008.
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 July 2, 2008, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been substantially prepared by the Exchange. The Exchange has
designated this proposal as non-controversial under Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\
which renders the proposed rule change effective upon filing with the
Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\15 U.S.C. 78s(b)(1).
\2\17 CFR 240.19b-4.
\3\15 U.S.C. 78s(b)(3)(A)(iii).
\4\17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NYSE Arca proposes to amend its rules to (i) extend the Quarterly
Options Series pilot program (``Pilot Program'') until July 10, 2009,
(ii) add provisions to the Pilot Program regarding the addition of new
strike prices and the delisting of inactive series and, (iii) make
minor technical changes. The text of the proposed rule change is
available on the Exchange's Web site at (http://www.nyse.com), at the
Exchange'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, 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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On July 12, 2006 the Exchange filed with the Commission a proposal
to list and trade Quarterly Options Series on a pilot basis (``Pilot
Program'') through July 10, 2007. The rule change was effective upon
filing.\5\ The original Pilot Program was subsequently extended and is
now due to expire on July 10, 2008.\6\ The Exchange now proposes to
extend the Pilot Program for another year, so that it will now expire
on July 10, 2009; to amend the Pilot Program in certain respects; and
make minor technical changes.
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\5\See Securities Exchange Act Release No. 54166 (July 18,
2006), 71 FR 42151 (July 25, 2006) (SR-NYSEArca-2006-45).
\6\See Securities Exchange Act Release No. 56119 (July 24,
2007), 72 FR 41563 (July 30, 2007) (SR-NYSEArca-2007-70).
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Pilot Extension
The Exchange stated that it would submit, in connection with any
proposed extension of the Pilot Program, a Pilot Program Report
(``Report'') that would provide an analysis of the Pilot Program
covering the entire period which the program was in effect. The Report
was to include: (1) Data and written analysis on the open interest and
trading volume in the classes for which Quarterly Options Series were
opened; (2) an assessment of the appropriateness of the option classes
selected for the Pilot Program; (3) an assessment of the impact of the
Pilot Program on the capacity on the Exchange, OPRA and on market data
vendors (to the extent data from market data vendors is available); (4)
any capacity problems or other problems that arose during the operation
of the Pilot Program and how the Exchange addressed such problems; (5)
any complaints that the Exchange received during the operation of the
Pilot Program and how the Exchange addressed them; and (6) any
additional information that would assist the Commission in assessing
the operation of the Pilot Program. The Exchange has submitted the
Report.
The Exchange represents that the Report supports its belief that
extension of the Pilot Program is proper. Among other things, the
Report shows the strength of the Pilot Program as reflected by the
overall volume and open interest of Quarterly Options Series traded on
NYSE Arca and other national options exchanges. The Report shows that
the Pilot Program has not created, and in the future should not create,
any capacity, operational or regulatory problems attributable to
Quarterly Options Series. Finally, NYSE Arca represents that the
Exchange has the necessary system capacity to support any additional
series listed as part of the Pilot Program.
Proposal Related to the Listing and Delisting of Strikes
On August 7, 2007, the Chicago Board Options Exchange (``CBOE'')
filed a proposal to revise the terms of its Quarterly Options Series
pilot program. As part of this filing, CBOE proposed to implement new
policies related to the listing and delisting of additional strike
prices for Quarterly Options Series. The proposal, as amended, was
approved by the Commission on March 3, 2008.\7\ NYSE Arca proposes to
adopt the revised terms of the CBOE's pilot program, for use in its own
Pilot Program.
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\7\See Securities Exchange Act Release No. 57410 (March 3,
2008), 73 FR 12483 (March 7, 2008) (SR-CBOE-2007-96).
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Specifically, NYSE Arca proposes to amend Rule 6.4, Commentary .08
to permit the Exchange to list additional strike prices for Quarterly
Options Series in exchange traded fund (``ETF'') options that fall
within a percentage range (30%) above and below the price of the
underlying ETF.\8\
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\8\ Pursuant to the existing Pilot Program, the Exchange is
presently limited to listing new strike prices on Quarterly Options
Series that fall within a $5 range from the closing price of the
underlying security on the preceding day.
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Additionally, upon demonstrated customer interest, the Exchange
also will be permitted to open additional strike prices of Quarterly
Options Series
[[Page 41393]]
in ETF options that are more than 30% above or below the current price
of the underlying ETF. Market-makers trading for their own account will
not be considered when determining customer interest under this
provision. In addition to the initial listed series, the proposal will
permit the Exchange to list up to sixty (60) additional series per
expiration month for each Quarterly Options Series in ETF options.
The proposed policies regarding the listing of new strikes are
identical to those approved for CBOE. The Exchange also proposes to
adopt the same policy approved for CBOE, regarding the delisting of
inactive strikes in Quarterly Options Series. Under the proposed
delisting policy, the Exchange will, on a monthly basis, review
Quarterly Options Series that are outside a range of five (5) strikes
above and five (5) strikes below the current price of the underlying
ETF, and delist series with no open interest in both the put and the
call series having a strike price: (i) Higher than the highest strike
price with open interest in the put and/or call series for a given
expiration month; or (ii) lower than the lowest strike price with open
interest in the put and/or call series for a given expiration month.
Notwithstanding the proposed delisting policy, the Exchange will grant
customer requests to add strikes and/or maintain strikes in Quarterly
Options Series eligible for delisting.
The delisting policy proposed by the Exchange is designed to
mitigate the number of options series with no open interest, and reduce
quote traffic accordingly. If during the life of the Pilot Program the
Exchange identifies series for delisting, the Exchange will notify
other options exchanges with similar delisting polices, and shall work
with such other exchanges to develop a uniform list of securities to be
delisted, to help to ensure uniform series delisting of multiply listed
Quarterly Options Series in ETF options.
Finally, the Exchange notes that the delisting policy, once
approved, would become part of the Pilot Program and, going forward,
would be considered by the Commission when the Exchange seeks to renew
or make permanent the Pilot Program in the future.
The proposed policies regarding the delisting of inactive strikes
are identical to those in place as part of the CBOE Quarterly Options
Series Pilot Program.
Non-Substantive Changes
The Exchange also proposes at this time to make minor, non-
substantive changes, to Rule 5.19(a)(3) and Rule 6.4 Commentary .08 in
order to revise the dates used in existing examples that describe the
listing process for Quarterly Options Series, and to renumber certain
subsections of the rule for clarity purposes. These changes serve only
to update the text, and make no changes to the Pilot Program itself, or
the rules governing such.
2. Statutory Basis
The Exchange believes that the continuation of the Pilot Program,
along with the proposed revision to the program, will continue to
stimulate customer interest in options by creating greater trading
opportunities and flexibility in investment choices. The Exchange
further believes that continuation of the Pilot Program will provide
the ability to more closely tailor investment strategies and provide a
valuable hedging tool for investors. Also, the Exchange believes that
by revising its Pilot Program to include similar provisions contained
in the CBOE Quarterly Options Series pilot program will make for more
uniform rules across exchanges that have implemented a Quarterly
Options Series pilot program. For these reasons, the Exchange believes
the proposed rule change is consistent with the Act and the rules and
regulations thereunder and, in particular, the requirements of section
6(b) of the Act.\9\ Specifically, the Exchange believes the proposed
rule change is consistent with the section 6(b)(5) of the Act,\10\
which requires that the rules of an exchange be designed to promote
just and equitable principles of trade, to prevent fraudulent and
manipulative acts, to remove impediments to and perfect the mechanism
for a free and open market and a national market system, and, in
general, to protect investors and the public interest.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposed rule change will not impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments on the proposed rule change were neither solicited
nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has designated the proposed rule change as one that:
(1) Does not significantly affect the protection of investors or the
public interest; (2) does not impose any significant burden on
competition; and (3) does not become operative for 30 days from the
date of filing, or such shorter time as the Commission may designate if
consistent with the protection of investors and the public interest.
Therefore, the foregoing rule change has become effective pursuant to
Section 19(b)(3)(A) of the Act \11\ and subparagraph (f)(6) of Rule
19b-4 thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to provide the Commission
with 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 fulfilled this requirement.
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The Exchange has asked the Commission to waive the operative delay
to permit the proposed rule change to become operative prior to the
30th day after filing. The Commission has determined that waiving the
30-day operative delay of the Exchange's proposal is consistent with
the protection of investors and the public interest and will promote
competition because such waiver will allow NYSE Arca to continue the
existing Pilot Program without interruption.\13\ Therefore, the
Commission designates the proposal operative upon filing.
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\13\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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The Commission notes that NYSE Arca's proposed changes regarding
additional series and the delisting policy will become part of the
Pilot Program and, going forward, its effects will be considered by the
Commission in the event that the Exchange seeks to renew or make
permanent the Pilot Program. Thus, in the Exchange's future reports on
the Pilot Program, the Exchange should include analysis of (1) the
impact of the additional series on the Exchange's market and quote
capacity, and (2) the implementation and effects of the delisting
policy, including the number of series eligible for delisting during
the period covered by the report, the number of series actually
delisted during that period (pursuant to the delisting policy or
otherwise), and documentation of any customer requests to maintain QOS
[[Page 41394]]
strikes that were otherwise eligible for delisting.
At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate the 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.
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 e-mail to rule-comments@sec.gov. Please include
File No. SR-NYSEArca-2008-72 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2008-72. 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 inspection
and copying in the Commission's Public Reference Room, 100 F Street,
NE., Washington, DC 20549, 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 No. SR-NYSEArca-2008-72 and should be
submitted on or before August 8, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-16421 Filed 7-17-08; 8:45 am]
BILLING CODE 8010-01-P