Federal Register / Vol. 76, No. 66 / Wednesday, April 6, 2011 / Notices 19165 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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. 

52986 (December 20, 2005) 70 FR 76897 (December 

28, 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 

Arca Rule 6.1(27), in respect of an underlying stock, 

as the principal market in which the underlying 

stock is traded. 

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

example. 

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–BX– 

2011–017 and should be submitted on 

or before April 27, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–8140 Filed 4–5–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64162; File No. SR– 

NYSEArca–2011–13] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by NYSE 

Arca, Inc. 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 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 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 .03 to NYSE Arca Rule 6.4 

to expand the $2.50 Strike Price 

Program. The text of the proposed rule 

change is available at the principal 

office of the Exchange, the 

Commission’s Public Reference Room, 

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 

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 6.4 at 

Commentary .03 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 .03 to 

NYSE Arca Rule 6.4 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 were 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. 

mstockstill on DSKH9S0YB1PROD with NOTICES

19166 Federal Register / Vol. 76, No. 66 / Wednesday, April 6, 2011 / Notices 

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. 62450 

(July 2, 2010) 75 FR 39712 (July 12, 2010). 

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). 

The Exchange is also making a small 

revision to the rule text to remove a 

reference to Exchange-Traded Fund 

Shares (‘‘ETF’’), as the strike interval for 

ETFs has been superseded by Rule 6.4 

Commentary .05, which permits strike 

price intervals for ETFs in $1 

increments under $200. 

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 43 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, 43 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 43 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 43 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 

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 this 

proposed rule change is consistent with 

Section 6(b) of the Securities Exchange 

Act of 1934 (‘‘Act’’) 9, in general, and 

furthers the objectives of Section 6(b)(5) 

of the Act 10 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. 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 

mstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 76, No. 66 / Wednesday, April 6, 2011 / Notices 19167 

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 57478 

(March 12, 2008), 73 FR 14521 (March 18, 2008) 

(SR–NASDAQ–2007–004 and SR–NASDAQ–2007– 

080) (a proposal to participate in the $2.50 Strike 

Price Program). 

4 In 2007, NOM proposed to participate in the 

$2.50 Strike Price Program. The $2.50 Strike Price 

Program allows the options exchanges to list 

options in up to 200 classes at $2.50 strike price 

intervals for strike prices greater than $25 but less 

than $75. See Securities Exchange Act Release Nos. 

40662 (November 12, 1998), 63 FR 64297 

(November 19, 1998) (order approving File Nos. 

SR–Amex–98–21; SR–CBOE–98–29; SR–PCX–98– 

31; and SR–Phlx–98–26) (‘‘1998 Order’’) and 52893 

(December 5, 2005), 70 FR 73488 (December 12, 

2005) (order approving File No. SR–Amex–2005– 

067). The 200 classes eligible for the $2.50 Strike 

Price Program were allocated among the options 

exchanges pursuant to a formula approved by the 

Commission as part of the permanent approval of 

the program. Each options exchange may list 

options with $2.50 strike price intervals on any 

options class that another exchange selects as part 

of its program. NOM’s rules provide that NOM may 

list series at $2.50 strike price intervals in any 

multiply traded option once another exchange has 

selected that option to be a part of the program. See 

NOM Rule, Chapter IV, Section 6, Supplementary 

Material .03(a). NOM participates in the $2.50 

Strike Price Program on the same terms and 

conditions as the other options exchanges. See 

Securities Exchange Act Release No. 57478 (March 

12, 2008), 73 FR 14521 (March 18, 2008) (SR– 

NASDAQ–2007–004 and SR–NASDAQ–2007–080). 

5The term ‘‘primary market’’ is defined in 

Exchange Rule 1000 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. 

6The 75 strike put would trade at $0.30 in this 

example. 

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–NYSEArca–2011–13 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–2011–13. 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–2011–13 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. 2011–8136 Filed 4–5–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64160; File No. SR– 

NASDAQ–2011–041] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by the 

NASDAQ Stock Market, 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, The NASDAQ Stock Market 

LLC (‘‘NASDAQ’’ 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 NASDAQ Stock Market LLC 

proposes to amend Chapter IV, 

Supplementary Material to Section 6, 

Series of Options Open for Trading, at 

.03, to expand the $2.50 Strike Price 

Program.3

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http:// 

www.nasdaq.cchwallstreet.com, at the 

principal office of the Exchange, on the 

Commission’s Web site at http:// 

www.sec.gov, 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. 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 

The purpose of this proposed rule 

change is to expand the current $2.50 

Strike Price Program (‘‘Program’’) 4 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.5 Currently, Chapter IV, 

Section 6 at Supplementary Material .03 

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 .03 to Chapter IV, 

Section 6 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,6 the 

protection offered would only take 

effect with a 7.40% decline in the 

mstockstill on DSKH9S0YB1PROD with NOTICES