[Federal Register Volume 75, Number 239 (Tuesday, December 14, 2010)]
[Notices]
[Pages 77932-77934]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-31290]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63475; File No. SR-NYSEAMEX-2010-114]
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Reestablishing a
Pilot Program Relating to Cabinet Trades Until June 1, 2011
December 8, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\
[[Page 77933]]
notice is hereby given that on December 2, 2010, NYSE Amex LLC
(``Exchange'' or ``NYSE Amex'') filed with the Securities and Exchange
Commission (``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 establish and extend its program that
allows transactions to take place at a price that is below $1 per
option contract until June 1, 201 [sic]. The text of the proposed rule
change is available at the Exchange, the Commission's Public Reference
Room, 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 purpose of this filing is to re-establish the Pilot Program \3\
under Rule 968NY to allow accommodation transactions (``Cabinet
Trades'') to take place at a price that is below $1 per option
contract, and to extend the program to June 1, 2011. The Exchange
proposes to extend the program to the same date as The Chicago Board
Options Exchange (``CBOE'').\4\ The Pilot Program expired on July 1,
2010.
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\3\ See Securities Exchange Act Release No. 61726 (March 17,
2010), 75 FR 14234 (March 24, 2010) (SR-NYSE Amex-2010-21).
\4\ See Securities Exchange Act Release No. 62192 (May 28,
2010), 75 FR 31828 (June 4, 2010) (SR-CBOE-2010-052).
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An ``accommodation'' or ``cabinet'' trade refers to trades in
listed options on the Exchange that are worthless or not actively
traded. Cabinet trading is generally conducted in accordance with the
Exchange Rules, except as provided in Exchange Rule 968NY Cabinet
Trades (Accommodation Transactions), which sets forth specific
procedures for engaging in cabinet trades. Rule 968NY currently
provides for cabinet transactions to occur via open outcry at a cabinet
price of a $1 per option contract in any options series open for
trading in the Exchange, except that the Rule is not applicable to
trading in option classes participating in the Penny Pilot Program.
Under the procedures, bids and offers (whether opening or closing a
position) at a price of $1 per option contract may be represented in
the trading crowd by a Floor Broker or by a Market-Maker or provided in
response to a request by a Trading Official, a Floor Broker or a
Market-Maker, but must yield priority to all resting orders in the
Cabinet (those orders held by the Trading Official, and which resting
cabinet orders may be closing only). So long as both the buyer and the
seller yield to orders resting in the cabinet book, opening cabinet
bids can trade with opening cabinet offers at $1 per option contract.
The Exchange temporarily amended the procedures through July 1,
2010 to allow transactions to take place in open outcry at a price of
at least $0 but less than $1 per option contract. These lower priced
transactions were permitted to be traded pursuant to the same
procedures applicable to $1 cabinet trades, except that (i) bids and
offers for opening transactions were only permitted to accommodate
closing transactions in order to limit use of the procedure to
liquidations of existing positions, and (ii) the procedures were also
made available for trading in option classes participating in the Penny
Pilot Program.\5\ The Exchange believed (and continues to believe) that
allowing a price of at least $0 but less than $1 would better
accommodate the closing of options positions in series that were
worthless or not actively traded, particularly due to recent market
conditions which had resulted in a significant number of series being
out-of-the-money. For example, a market participant might have a long
position in a call series with a strike price of $100 and the
underlying stock might be trading at $30. In such an instance, there
might not otherwise be a market for that person to close-out the
position even at the $1 cabinet price (e.g., the series might be quoted
no bid).
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\5\ Currently the $1 cabinet trading procedures are limited to
options classes traded in $0.05 or $0.10 standard increment. The $1
cabinet trading procedures are not available in Penny Pilot Program
classes because in those classes an option series can trade in a
standard increment as low as $0.01 per share (or $1.00 per option
contract with a 100 share multiplier). Because the instant rule
change would allow trading below $0.01 per share (or $1.00 per
option contract with a 100 share multiplier), the procedures would
be made available for all classes, including those classes
participating in the Penny Pilot Program.
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As with other accommodation liquidations under Rule 968NY,
transactions that occur for less than $1 will not be disseminated to
the public on the consolidated tape. In addition, as with other
accommodation liquidations under Rule 968NY, the transactions will be
exempt from the Consolidated Options Audit Trail (``COATS'')
requirements of Exchange Rule 955NY. Order Format and System Entry
Requirements. However, the Exchange will maintain quotation, order and
transaction information for the transactions in the same format as the
COATS data is maintained. In this regard, all transactions for less
than $1 must be reported to the Exchange following the close of each
business day.
The Pilot Program lapsed on July 1, 2010. The Exchange is proposing
to reinstate the Program at this time to be in place for end-of-year
liquidations. During the period from July 1 to date, no sub-penny
cabinet trades were executed on the Exchange.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) \6\ of the Securities Exchange Act of 1934 (the ``Act''),
in general, and furthers the objectives of Section 6(b)(5) \7\ 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. The Exchange believes that allowing
for liquidations at a price less than $1 per option contract will
better facilitate the closing of options positions that are worthless
or not actively trading, especially in Penny Pilot issues where Cabinet
Trades are not otherwise permitted.
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\6\ 15 U.S.C. 78f(b).
\7\ 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.
[[Page 77934]]
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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) thereunder \9\ because
the proposal does not: (i) Significantly affect the protection of
investors or the public interest; (ii) impose any significant burden on
competition; and (iii) by its terms, 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.\10\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6).
\10\ In addition, Rule 19b-4(f)(6) provides that the Exchange
must provide the Commission 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 satisfied this
requirement.
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The Exchange has requested that the Commission waive the 30-day
operative delay period. The Commission hereby grants the request. The
Commission notes that the proposal is nearly identical to the rules of
another exchange.\11\ Therefore, the Commission believes it is
consistent with the protection of investors and the public interest to
waive the 30-day operative delay and designates the proposal as
operative upon filing.\12\
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\11\ See CBOE Rule 6.54, Interpretations and Policies .03.
\12\ 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).
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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 necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.\13\
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\13\ 15 U.S.C. 78s(b)(3)(C).
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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-2010-114 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-2010-114. 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 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 Number SR-
NYSEAmex-2010-114 and should be submitted on or before January 4, 2011.
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,
Deputy Secretary.
[FR Doc. 2010-31290 Filed 12-13-10; 8:45 am]
BILLING CODE 8011-01-P