[Federal Register Volume 75, Number 93 (Friday, May 14, 2010)]
[Notices]
[Pages 27381-27383]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-11542]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62054; File No. SR-NYSEArca-2010-34]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Adopt Commentary
.02 to Rule 5.32, Terms of FLEX Options, to Establish a Pilot Program
To Permit FLEX Options to Trade With no Minimum Size Requirement
May 6, 2010.
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 April 29, 2010, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to adopt Commentary .02 to Rule 5.32, Terms
of FLEX Options, to establish a Pilot Program to permit FLEX Options to
trade with no minimum size requirement. The text of the proposed rule
change is attached as Exhibit 5 to the 19b-4 form. A copy of this
filing is available on the Exchange's Web site at http://www.nyse.com,
at the Exchange's principal office, at the Commission's Public
Reference Room, and on the Commission's Web site at http://www.sec.gov.
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 self-regulatory organization
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 the filing is to adopt rules to establish a Pilot
Program to eliminate minimum value sizes for both FLEX Equity options
and FLEX Index options similar to a pilot approved for the Chicago
Board Options Exchange (``CBOE'').\3\
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\3\ See Exchange Act Release No. 34-61439 (January 28, 2010) 75
FR 5831 (February 4, 2010).
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Presently, the Exchange minimum value size requirements for an
opening FLEX Equity transaction in any FLEX series in which there is no
open interest
[[Page 27382]]
at the time the Request for Quote is submitted is the lesser of 250
contracts or the number of contracts overlying $1 million in underlying
securities. An opening FLEX Index transaction in a FLEX series in which
there is no open interest requires a minimum size of $10 million
Underlying Equivalent Value. The Exchange proposes to adopt a fourteen
month pilot program that eliminates the minimum value size requirements
for both FLEX Equity and FLEX Index options. If, in the future, the
Exchange proposes an extension of the minimum value size Pilot Program,
or should the Exchange propose to make the new Program permanent, the
Exchange will submit, along with any filing proposing such amendments
to the Program, a Pilot Program report that would provide an analysis
of the Pilot covering the period during which the Program was in
effect. This minimum value size report would include: (i) Data and
analysis on the open interest and trading volume in (a) FLEX Equity
Options with opening transaction with a minimum size of 0 to 249
contracts and less than $1 million in underlying value; (b) FLEX Index
Options with opening transaction with a minimum opening size of less
than $10 million in underlying equivalent value; and (ii) analysis on
the types of investors that initiated opening FLEX Equity and Index
Options transactions (i.e., institutional, high net worth, or retail).
The report would be submitted to the Commission at least two months
prior to the expiration date of the Pilot Program and would be provided
on a confidential basis.
The Exchange notes that any positions established under this Pilot
would not be affected by the expiration of the Pilot. For example, a
10-contract FLEX Equity Option opening position that overlies less than
$1 million in the underlying security and expires in January 2015 could
be established during the 14-month Pilot. If the Pilot Program were not
extended, the position would continue to exist and any further trading
in the series would be subject to the minimum value size requirements
for continued trading in that series. The proposed minimum opening
transaction size elimination is based on a similar pilot approved for
use on CBOE.\4\
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\4\ See Note 3 above.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) \5\ of the Securities Exchange Act of 1934 (the ``Act''),
in general, and furthers the objectives of Section 6(b)(5) \6\ in
particular in that it is designed to promote just and equitable
principles of trade, to prevent fraudulent and manipulative acts, 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 by eliminating a minimum size for
FLEX transactions, which the Exchange believes will provide greater
opportunities for investors to manage risk through the use of FLEX
options.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(5).
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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 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
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (1)
Significantly affect the protection of investors or the public
interest; (2) impose any significant burden on competition; and (3)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate if consistent with
the protection of investors and the public interest, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \7\ and Rule 19b-
4(f)(6) thereunder.\8\
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\7\ 15 U.S.C. 78s(b)(3)(A).
\8\ 17 CFR 240.19b-4(f)(6). When filing a proposed rule change
pursuant to Rule 19b-4(f)(6) under the Act, an Exchange is required
to give the Commission 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 met this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally may
not become operative prior to 30 days after the date of filing.\9\
However, Rule 19b-4(f)(6) \10\ permits the Commission to designate a
shorter time if such action is consistent with the protection of
investors and the public interest. NYSE Arca has requested that the
Commission waive the 30-day operative delay.
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\9\ 17 CFR 240.19b-4(f)(6)(iii).
\10\ Id.
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The Commission has considered NYSE Arca's request to waive the 30-
day operative delay. Because, however, the Commission does not believe,
practically speaking, that a pilot should retroactively commence, the
Commission is only waiving the operative delay as of the date of this
notice for the reasons discussed below.
The Commission believes that shortening the 30-day operative delay
to allow the commencement of the pilot as of the date of this notice is
consistent with the protection of investors and the public interest.
The Commission notes that the proposed rule change is substantially
similar to a pilot that was previously approved by the Commission and
is currently in existence for CBOE.\11\ The Commission also notes that
the corresponding CBOE pilot was subject to full notice and comment in
the Federal Register, and that the Commission only received comments
that supported that proposal.\12\ Moreover, waiving the operative date
as of the date of this notice is consistent with approval of CBOE's
pilot, which allowed implementation as of the date of the Commission's
approval order. For these reasons, the Commission designates the
proposal to be operative upon the date of issuance of this notice.\13\
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\11\ See CBOE Rule 24A.4 Interpretations and Policies .01(b);
see also Securities Exchange Act Release No. 61439 (January 28,
2010) 75 FR 5831 (February 4, 2010) (SR-CBOE-2009-087).
\12\ See Securities Exchange Act Release No. 61439 (January 28,
2010) 75 FR 5831 (February 4, 2010) (SR-CBOE-2009-087).
\13\ For the purposes only of waiving the operative date of this
proposal, 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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At any time within 60 days of the filing of such proposed rule
change, the Commission may summarily abrogate 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 the 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:
[[Page 27383]]
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-NYSEArca-2010-34 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-NYSEArca-2010-34. 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, 100 F
Street, NE., Washington, DC 20549, on official business days between
the hours of 10 a.m. and 3 p.m. Copies of the 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 Number SR-
NYSEArca-2010-34 and should be submitted on or before June 4, 2010.
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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-11542 Filed 5-13-10; 8:45 am]
BILLING CODE 8010-01-P