19160 Federal Register / Vol. 76, No. 66 / Wednesday, April 6, 2011 / Notices 

83See note 3 supra. 

84Response Letter. 

85 In approving this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

86 15 U.S.C. 78o–3(b)(6). 

87Cf. Response Letter (describing plans for further 

consideration of issues by the Discovery Task 

Force). 

88 15 U.S.C. 78s(b)(2). 

89 15 U.S.C. 78s(b)(2). 

90 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

required customers to produce all 

insurance information received from an 

insurance sales agent or securities 

broker relating to such insurance.83

FINRA has amended the proposed item 

to clarify its intended scope by deleting 

the reference to ‘‘insurance’’ before 

‘‘information.’’ 84

III. Commission’s Findings 

After careful review of the proposed 

rule change, the comment letters and 

the FINRA Response Letter, the 

Commission finds that the proposed 

rule change, as modified by Amendment 

No. 1, is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities association.85 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with Section 15A(b)(6) of the Act,86

which requires, among other things, that 

FINRA rules be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, and, in general, to 

protect investors and the public interest. 

The Commission believes that the 

revisions to the Discovery Guide will 

help reduce the number and limit the 

scope of disputes involving document 

production and other matters, thereby 

improving the arbitration process for the 

benefit of the public investors, brokerdealer firms, and associated persons 

who use the process. The revisions to 

the Discovery Guide are the result of 

over six years of consultation by FINRA 

with its constituents. The Commission 

also expects that further improvement of 

the process should be possible through 

the Discovery Task Force’s 

consideration of discovery issues as 

they arise.87

IV. Accelerated Approval 

The Commission finds goods cause, 

pursuant to Section 19(b)(2) of the 

Exchange Act,88 for approving the 

proposed rule change, as modified by 

Amendment No. 1 thereto, prior to the 

30th day after publication of notice of 

the filing of Amendment No. 1 in the 

Federal Register. The proposed rule 

change was informed by FINRA’s 

consideration of, and the incorporation 

of many suggestions made in, extensive 

comments on a 2008 proposal to update 

the Discovery Guide, and Amendment 

No. 1’s modifications to the proposed 

rule change add clarity to the Discovery 

Guide and provide additional guidance 

to parties and arbitrators. 

Accordingly, the Commission finds 

that good cause exists to approve the 

proposal, as modified by Amendment 

No. 1, on an accelerated basis. 

V. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change, as modified by Amendment No. 

1, 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 rulecomments@sec.gov. Please include File 

Number SR–FINRA–2010–035 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–FINRA–2010–035. 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 

FINRA. 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–FINRA–2010–035 and 

should be submitted on or before April 

27, 2011. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,89 that the 

proposed rule change (SR–FINRA– 

2010–035), as modified by Amendment 

No. 1, be, and hereby is, approved on an 

accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.90

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–8200 Filed 4–5–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64163; File No. SR– 

NYSEAmex–2011–22] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by NYSE 

Amex LLC To Expand the $2.50 Strike 

Price Program 

March 31, 2011. 

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 March 

29, 2011, NYSE Amex LLC (‘‘NYSE 

Amex’’ 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 prepared 

by the Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Commentary .07 to NYSE Amex Rule 

903 to expand the $2.50 Strike Price 

Program. The text of the proposed rule 

change is available at the principal 

office of Exchange, the Commission’s 

Public Reference Room, on the 

Commission’s Web site at http:// 

www.sec.gov, and http://www.nyse.com. 

mstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 76, No. 66 / Wednesday, April 6, 2011 / Notices 19161 

3See Securities Exchange Act Release No. 35993 

(July 19, 1995), 60 FR 38073 (July 25, 1995) 

(approving File Nos. SR—Phlx–95–08, SR–Amex– 

95–12, SR–PSE–95–07, SR–CBOE–95–19, and SR– 

NYSE–95–12). See also Exchange Act Release No. 

52893 (December 5, 2005) 70 FR 73488 (December 

12, 2005) (a rule change to allow the listing of 

options with $2.50 strike price intervals for strike 

prices between $50 and $75). 

4The term ‘‘primary market’’ is defined in NYSE 

Amex Rule 900.2NY(62), in respect of an 

underlying stock or Exchange-Traded Fund Share, 

as the principal market in which the underlying 

stock or Exchange-Traded Fund Share is traded. 

5The 75 strike put would trade at $.30 in this 

example. 

6See Securities Exchange Act Release No. 40662 

(November 12, 1998), 63 FR 64297 (November 19, 

1998) (approving File Nos. SR–Amex–98–21, SR– 

CBOE–98–29, SR–PCX–98–31, and SR Phlx–98–26). 

7Currently, the Chicago Board Options Exchange 

(‘‘CBOE’’) has an allocation of 60 options. 

8See Securities Exchange Act Release No. 62452 

(July 6, 2010) 75 FR 40011 (July 13, 2010). 

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 this proposed rule 

change is to expand the current $2.50 

Strike Price Program (‘‘Program’’)3 to 

permit the listing of options with $2.50 

strike price intervals for options with 

strike prices between $50 and $100, 

provided the $2.50 strike price intervals 

are no more than $10 from the closing 

price of the underlying stock in the 

primary market.4 Additionally, the 

Exchange proposes to increase the 

number of option classes on individual 

stocks for which the intervals of strike 

prices will be $2.50 to 60 options 

classes. 

Currently, Exchange Rule 903 at 

Commentary .07 permits the listing of 

options with $2.50 strike price intervals 

for options with strike prices between 

$50 and $75. Specifically, the Exchange 

proposes to amend Commentary .07 to 

Exchange Rule 903 to amend the current 

text. 

For example, consider a hypothetical 

where Caterpillar, Inc. (‘‘CAT’’) was 

trading at $81. With approximately one 

month remaining until expiration, and 

with a front month at-the-money put 

option (the 80 strike) trading at 

approximately $1.30, the investor would 

be able to purchase a $77.50 strike put 

at an estimated $.60 per contract. Today, 

the next available strike of a one month 

put option is the 75 strike. While the 75 

strike put would certainly trade at a 

lesser price than the 80 strike put,5 the 

protection offered would only take 

effect with a 7.40% decline in the 

market as opposed to a 4.30% decline 

in the market. The additional choice 

would provide the investor an 

additional opportunity to hedge 

exposure (the opportunity to hedge with 

a reduced outlay) and thereby minimize 

risk if there were a decline in the stock 

price of CAT. 

Another example would be if an 

investor desired to sell call options to 

hedge the exposure of an underlying 

stock position and enhance yield. 

Consider a hypothetical where CAT was 

trading at $81 and the second month 

(two months remaining) of a recently 

out-of-the-money call option (the 85 

strike) was trading at approximately 

$2.35. If the investor where to sell the 

85 call against an existing stock 

position, the investor could yield a 

return of approximately 2.90% over a 

two month period or an annualized 

return of 17.4%. By providing an 

additional $2.50 strike interval above 

$75, the investor would have the 

opportunity to sell the 82.50 strike 

instead of the 85 strike. If the 85 strike 

call were trading at $2.35, the 82.50 

strike call would trade at approximately 

3.30. By selling the 82.50 strike call at 

3.30 against an existing stock position, 

the investor could yield a 4.07% return 

over a two month period or an 

annualized 24.40% return. Therefore, an 

additional choice of a $2.50 strike 

interval could afford varying yields to 

the investor. 

The Exchange believes that the 

Program has to date created additional 

trading opportunities for investors, 

thereby benefiting the marketplace. The 

existence of $2.50 strike prices with 

strike intervals above $75 affords 

investors the ability to more closely 

tailor investment strategies to the 

precise movement of the underlying 

security and meet their investment, 

trading and risk management 

requirements. 

The Exchange is also proposing to 

make a non-substantive amendment to 

the rule text to remove language 

referring to the original SEC approval of 

the Program. 

The Exchange is also proposing to 

increase the number of option classes on 

individual stocks for which the intervals 

of strike prices will be $2.50 to 60 

options classes. Currently, the Exchange 

may select up to 51 options classes on 

individual stocks for which the intervals 

of strike prices will be $2.50. Initially 

adopted in 1995 as a pilot program, the 

options exchanges at that time were 

permitted to list options with $2.50 

strike price intervals up to $50 on a total 

of up to 100 option classes. In 1998, the 

pilot program was expanded and 

permanently approved to allow the 

options exchanges collectively to select 

up to 200 option classes on which to list 

options with $2.50 strike price intervals 

up to $50. Of these 200 options classes 

eligible for the Program, 51 classes were 

allocated to the Exchange pursuant to a 

formula approved by the Commission as 

part of the permanent approval of the 

Program.6 In addition, each options 

exchange is permitted to list options 

with $2.50 strike price intervals on any 

option class that another options 

exchange selects under its program. 

Since 1998, the 200 options classes 

have not been expanded, although 

increasingly more companies have 

completed initial public offerings from 

1998 through 2010. Additionally, 

significantly more options classes are 

trading in 2010 as compared to 1998. 

The Exchange proposes to increase its 

allocation from 51 to 60 7 options 

classes to accommodate investor 

requests for $2.50 strikes in certain 

options classes. The Exchange believes 

that offering additional options classes 

would benefit investors. 

Furthermore, the Exchange does not 

believe that this proposal would have a 

negative impact on the marketplace. The 

Exchange would compare this proposal 

with the $1 Strike Price expansion, 

wherein the Exchange expanded its $1 

Strike Price Program from 55 individual 

stocks to 150 individual stocks on 

which an option series may be listed at 

$1 strike price intervals.8 The Exchange 

believes that this proposal, wherein the 

Exchange is proposing to increase its 

allocation from 51 to 60 options classes 

is substantially less than the $1 Strike 

Price Program increase and therefore 

would have less impact than that 

program, which has not had any 

negative impact on the market in terms 

of proliferation of quote volume or 

fragmentation. 

With regard to the impact of this 

proposal on system capacity, the 

Exchange has analyzed its capacity and 

represents that it and the Options Price 

Reporting Authority have the necessary 

system capacity to handle the potential 

mstockstill on DSKH9S0YB1PROD with NOTICES

19162 Federal Register / Vol. 76, No. 66 / Wednesday, April 6, 2011 / Notices 

9 15 U.S.C. 78f(b). 

10 15 U.S.C. 78f(b)(5). 

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 the Exchange to give the 

Commission written notice of the Exchange’s 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. 

13See Securities Exchange Act Release No. 64157 

(March 31, 2011) (SR–Phlx–2011–15) (order 

approving expansion of $2.50 Strike Price Program). 

14For 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). 15 17 CFR 200.30–3(a)(12). 

additional traffic associated with the 

listing and trading of classes on 

individual stocks in the $2.50 Strike 

Price Program. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Securities Exchange Act of 1934 9

(the ‘‘Act’’) in general, and furthers the 

objectives of Section 6(b)(5) of the Act 10

in particular, in that it is 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. The 

Exchange believes that the effect of the 

proposed expansion on the marketplace 

would not result in a material 

proliferation of quote volume or 

concerns with fragmentation. In 

addition, the Exchange believes that it 

has the necessary system capacity to 

handle the potential additional traffic 

associated with the listing and trading 

of additional series. 

Rather, the Exchange believes the 

$2.50 Strike Price Program proposal 

would provide the investing public and 

other market participants increased 

opportunities to better manage their risk 

exposure. Accordingly, the Exchange 

believes that the proposal to expand the 

number of classes in the Program and to 

allow the listing of options with $2.50 

strike price intervals for options with 

strike prices between $50 and $100 

should further benefit investors and the 

market by providing greater trading 

opportunities for those underlying 

stocks that have low volatility and thus 

trade in a narrow range. 

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 significantly affect the 

protection of investors or the public 

interest, does not impose any significant 

burden on competition, and, by its 

terms, does not become operative for 30 

days from the date on which it was 

filed, or such shorter time as the 

Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 11 and Rule 19b– 

4(f)(6) thereunder.12

The Exchange has requested that the 

Commission waive the 30-day operative 

delay. The Commission believes that 

waiver of the operative delay is 

consistent with the protection of 

investors and the public interest 

because the proposal is substantially 

similar to that of another exchange that 

has been approved by the 

Commission.13 Therefore, the 

Commission designates the proposal 

operative upon filing.14

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. 

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 rulecomments@sec.gov. Please include File 

Number SR–NYSEAmex–2011–22 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–2011–22. 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– 

NYSEAmex–2011–22 and should be 

submitted on or before April 27, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–8141 Filed 4–5–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64161; File No. SR–BX– 

2011–017] 

Self-Regulatory Organizations; 

NASDAQ OMX BX, Inc.; Notice of Filing 

and Immediate Effectiveness of 

Proposed Rule Change To Amend the 

BOX Rules To Expand the $2.50 Strike 

Price Program 

March 31, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

mstockstill on DSKH9S0YB1PROD with NOTICES