[Federal Register Volume 75, Number 239 (Tuesday, December 14, 2010)]
[Notices]
[Pages 77923-77925]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-31228]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63463; File No. SR-NYSEAmex-2010-109]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by NYSE Amex LLC Amending Its Rules Regarding the Listing of
Options Series With $1 Strike Prices
December 8, 2010.
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 November 24, 2010, NYSE Amex LLC (the ``Exchange'' or ``NYSE
Amex'') 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 Exchange. 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 amend its rules regarding the listing of
$1 strike prices. The text of the proposed rule change is available at
the principal office of the Exchange, the Commission's Public Reference
Room, on the Commission's Web site at http://www.sec.gov, and http://www.nyse.com.
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 903 Commentary .06 to improve
the operation of the $1 Strike Price Program.
Currently, the $1 Strike Price Program only allows the listing of
new $1 strikes within $5 of the previous day's closing price. In
certain circumstances this has led to situations where there are no at-
the-money $1 strikes for a day, despite significant demand. For
instance, on November 15, 2010, the underlying shares of Isilon Systems
Inc. opened at $33.83. It had closed the previous trading day at
$26.29. Options were available in $1 intervals up to $31, but because
of the restriction to only listing within $5 of the previous close, the
Exchange was not able to add $32, $33, $34, $36, $37 or $38 strikes
during the day.
The Exchange proposes that $1 interval strike prices be allowed to
be added immediately within $5 of the official opening price in the
primary listing market. Thus, on any day, $1 Strike Program strikes may
be added within $5 of either the opening price or the previous day's
closing price.
On occasion, the price movement in the underlying security has been
so great that listing within $5 of either the previous day's closing
price or the day's opening price will leave a gap in the continuity of
strike prices. For instance, if an issue closes at $14 one day, and the
next day opens above $27, the $21 and $22 strikes will be more than $5
from either benchmark. The Exchange proposes that any such
discontinuity be avoided by allowing the listing of all $1 Strike
Program strikes between the closing price and the opening price.
Additionally, issues that are in the $1 Strike Price Program may
currently have $2.50 interval strike prices added that
[[Page 77924]]
are more than $5 from the underlying price or are more than a nine
months to expiration (long-term options series). In such cases, the
listing of a $2.50 interval strike may lead to discontinuities in
strike prices and also a lack of parallel strikes in different
expiration months of the same issue. For instance, under the current
rules, the Exchange may list a $12.50 strike in a $1 Strike Program
issue where the underlying price is $24. This allowance was provided to
avoid too large of an interval between the standard strike prices of
$10 and $15. The unintended consequence, however, is that if the
underlying price should decline to $16, the Exchange would not be able
to list a $12 or $13 strike. If the underlying stayed near this level
at expiration, a new expiration month would have the $12 and $13 strike
but not the $12.50, leading to a disparity in strike intervals in
different months of the same option class. This has also led to
investor confusion, as they regularly request the addition of
inappropriate strikes so as to roll a position from one month to
another at the same strike level.
To avoid this problem, the Exchange proposes to prohibit $2.50
interval strikes below $50 in all $1 Strike Price Program issues,
including long term option series. At each standard $5 increment strike
more than $5 from the price of the underlying security, the Exchange
proposes to list the strike $2 above the standard strike for each
interval above the price of the underlying security, and $2 below the
standard strike, for each interval below the price of the underlying
security, provided it meets the Options Listing Procedures Plan
(``OLPP'') Provisions in Rule 903A.\3\ For instance, if the underlying
security was trading at $19, the Exchange could list, for each month,
the following strikes: $3, $5, $8, $10, $13, $14, $15, $16, $17, $18,
$19, $20, $21, $22, $23, $24, $25, $27, $30, $32, $35, and $37.
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\3\ Rule 903A codifies the limitation on strike price ranges
outlined in the OLPP, which, except in limited circumstances,
prohibits options series with an exercise price more than 100% above
or below the price of the underlying security if that price is $20
or less. If the price of the underlying security is greater than
$20, the Exchange shall not list new options series with an exercise
price more than 50% above or below the price of the underlying
security.
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Instead of $2.50 strikes for long-term options, the Exchange
proposes to list one long-term $1 Strike option series strike in the
interval between each standard $5 strike, with the $1 Strike being $2
above the standard strike price for each interval above the price of
the underlying security, and $2 below the standard strike price, for
each interval below the price of the underlying security. In addition,
the Exchange may list the long-term $1 strike which is $2 above the
standard strike just below the underlying price at the time of listing,
and may add additional long-term options series strikes as the price of
the underlying security moves, consistent with the OLPP. For instance,
if the underlying is trading at $21.25, long-term strikes could be
listed at $15, $18, $20, $22, $25, $27, and $30. If the underlying
subsequently moved to $22, the $32 strike could be added. If the
underlying moved to $19.75, the $13, $10, $8, and $5 strikes could be
added.
The Exchange also proposes that additional long-term option strikes
may not be listed within $1 of an existing strike until less than nine
months to expiration.
Finally, the Exchange represents that it has the necessary systems
capacity to support the small increase in new options series that will
result from these changes to the $1 Strike Price Program.
2. Statutory Basis
The Exchange believes that this proposed rule change is consistent
with Section 6(b) of the Securities Exchange Act of 1934 (``Act''),\4\
in general, and furthers the objectives of Section 6(b)(5) of the Act
\5\ in particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, promote just and equitable principles
of trade, 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. In particular, the proposed rule
change seeks to reduce investor confusion and address issues that have
arisen in the operation of the $1 Strike Price Program by providing a
consistent application of strike price intervals for issues in the $1
Strike Price Program.
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\4\ 15 U.S.C. 78f(b).
\5\ 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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be 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 e-mail to [email protected]. Please include
File Number SR-NYSEAmex-2010-109 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-NYSEAmex-2010-109. 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
[[Page 77925]]
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-NYSEAmex-2010-109 and should
be submitted on or before January 4, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-31228 Filed 12-13-10; 8:45 am]
BILLING CODE 8011-01-P