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

Federal Register / Vol. 76, No. 66 / Wednesday, April 6, 2011 / Notices 19163 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(6). 

4The $2.50 Strike Price Program existed among 

the options exchanges when BOX began operations 

in 2004. Each options exchange is permitted to list 

options with $2.50 strike price intervals on any 

options class that another exchange selects under 

the Program. See Exchange Act Release Nos. 49068 

(January 13, 2004) 69 FR 2775 (January 20, 2004) 

(Order Approving Establishment of BOX Rules) 

(BSE–2002–15) and 56655 (October 12, 2007) 72 FR 

59126 (October 18, 2007) (Notice of Filing and 

Immediate Effectiveness of BSE–2007–47). 

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

I, Section 1(a)(51) of the BOX Rules to mean the 

principal market in which an underlying security 

is traded. 

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

example. 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that, on March 

30, 2011, NASDAQ OMX BX, Inc. (the 

‘‘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 Exchange has 

designated the proposed rule change as 

constituting a ‘‘non-controversial’’ rule 

change under paragraph (f) (6) of Rule 

19b–4 under the Act,3 which renders 

the proposal effective upon receipt of 

the filing. 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 

Chapter IV, Section 6 (Series of Options 

Contracts Open for Trading) of the Rules 

of the Boston Options Exchange Group, 

LLC (‘‘BOX’’) to expand the $2.50 Strike 

Price Program. The text of the proposed 

rule change is available from the 

principal office of the Exchange, on the 

Commission’s Web site at http:// 

www.sec.gov, at the Commission’s 

Public Reference Room, and also on the 

Exchange’s internet Web site at http:// 

nasdaqomxbx.cchwallstreet.com/ 

NASDAQOMXBX/Filings/. 

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 these statements may be examined at 

the places specified in Item IV below. 

The self-regulatory organization 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 Additionally, BOX 

proposes to specify that it may select up 

to sixty (60) option classes on 

individual stocks for which the intervals 

of strike prices will be $2.50, and to 

delete certain redundant parts of its rule 

related to the Program. 

Currently, Supplementary Material 

.03 to Chapter IV, Section 6 of the BOX 

Rules permits the listing of options with 

$2.50 strike price intervals for options 

with strike prices between $50 and $75. 

Specifically, BOX proposes to amend 

the current text of Supplementary 

Material .03 to Chapter IV, Section 6 of 

the BOX Rules to expand the Program. 

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 

market as opposed to a 4.30% decline 

in the market. The $77.50 strike put 

would provide the investor an 

additional choice 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 

strike 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. 

BOX 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. 

BOX is also proposing to specify that 

it may select up to 60 option classes on 

individual stocks for which the intervals 

of strike prices will be $2.50. BOX has 

participated in the industry wide $2.50 

Strike Price Program since BOX’s 

inception in 2004. Currently, the 

options exchanges may collectively 

select up to 200 options classes on 

individual stocks for which the intervals 

of strike prices will be $2.50. 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. 

The industry-wide collection of 200 

options classes has not been expanded 

since 1998, although increasingly more 

companies have completed initial 

public offerings from 1998 through 

2010. Additionally, significantly more 

options classes are trading in 2011 as 

compared to 1998. The Exchange 

proposes to specify that BOX may select 

up to 60 options classes to remain 

competitive with other exchanges and to 

offer investors additional investment 

choices. BOX believes that offering 

additional options classes would benefit 

investors. 

Furthermore, BOX does not believe 

that this proposal would have a negative 

impact on the marketplace. BOX would 

compare this proposal with the $1 

Strike Price expansion, wherein BOX, 

among several options exchanges, 

mstockstill on DSKH9S0YB1PROD with NOTICES

19164 Federal Register / Vol. 76, No. 66 / Wednesday, April 6, 2011 / Notices 

7See Exchange Act Release No. 62553 (July 22, 

2010) 75 FR 44826 (July 29, 2010) (BX–2010–050). 

8 15 U.S.C. 78f(b). 

9 15 U.S.C. 78f(b)(5). 

10 15 U.S.C. 78s(b)(3)(A). 

11 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 Commission 

has waived the five-day prefiling requirement in 

this case. 

12See Securities Exchange Act Release No. 64157 

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

approving expansion of $2.50 Strike Price Program). 

13For 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). 

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.7 BOX believes that this 

proposed rule change that would, in 

part, result in an increase to the 200 

options classes in the industry wide 

Program, is less than the $1 Strike Price 

Program increase among several 

exchanges 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. BOX 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. 

With regard to the impact of this 

proposal on system capacity, BOX 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 additional classes 

on individual stocks in the $2.50 Strike 

Price Program. 

Finally, BOX proposes to delete 

certain redundant parts of Chapter IV, 

Section 6 of the BOX Rules and the 

related Supplementary Material. The 

rule and related Supplementary 

Material are redundant in stating that 

BOX may list multiply-traded options 

classes selected by another exchange as 

part of the $2.50 Strike Price Program. 

BOX proposes to delete the repetitive 

portions of the rule and related 

Supplementary Material as unnecessary. 

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with the 

requirements of Section 6(b) of the Act,8

in general, and furthers the objectives of 

Section 6(b)(5) of the Act,9 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. BOX 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, BOX believes that it has the 

necessary system capacity to handle the 

potential additional traffic associated 

with the listing and trading of classes. 

Rather, BOX 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, BOX believes that the 

proposal to expand the Program 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. While 

expansion of the $2.50 Strike Price 

Program will generate additional quote 

traffic, BOX does not believe that this 

increased traffic will become 

unmanageable since the proposal is 

limited to a fixed number of classes. 

Further, BOX does not believe that the 

proposal will result in a material 

proliferation of additional series 

because it is limited to a fixed number 

of classes and BOX does not believe that 

the additional price points will result in 

fractured liquidity. 

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 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 

The Exchange has neither solicited 

nor received comments on 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 10 and Rule 19b– 

4(f)(6) thereunder.11

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.12 Therefore, the 

Commission designates the proposal 

operative upon filing.13

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–BX–2011–017 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–BX–2011–017. 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 

mstockstill on DSKH9S0YB1PROD with NOTICES

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