71168 Federal Register / Vol. 75, No. 224 / Monday, November 22, 2010 / Notices 

12 15 U.S.C. 78o–3(b)(6). 13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(6)(iii). 

Regulatory Notice to be published no 

later than 60 days following 

Commission approval. The effective 

date will be no later than 90 days 

following publication of the Regulatory 

Notice announcing Commission 

approval. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,12 which 

requires, among other things, that 

FINRA rules must 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 proposed rule 

change will further these purposes by 

restricting certain members and new 

member applicants from being able to 

associate with statutorily disqualified 

persons in light of the concerns to 

investor protection raised by such 

associations. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

FINRA does not believe that the 

proposed rule change will result in 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 

Written comments were neither 

solicited nor received. 

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 

such 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 rulecomments@sec.gov. Please include File 

Number SR–FINRA–2010–056 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–2010–056. 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–2010–056 and 

should be submitted on or before 

December 13, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–29281 Filed 11–19–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63322; File No. SR–BATS– 

2010–032] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Establish a $0.50 

Strike Program 

November 16, 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 10, 2010, BATS Exchange, 

Inc. (the ‘‘Exchange’’ or ‘‘BATS’’) filed 

with the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘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 this 

proposal as a ‘‘non-controversial’’ 

proposed rule change pursuant to 

Section 19(b)(3)(A) of the Act 3 and Rule 

19b–4(f)(6)(iii) thereunder,4 which 

renders it effective upon filing with the 

Commission. 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 is proposing to amend 

Rule 19.6 (Series of Options Contracts 

Open for Trading) to adopt a $0.50 

Strike Program consistent with 

analogous programs offered by other 

options exchanges. 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at http://www.batstrading.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 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 

Exchange has prepared summaries, set 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 224 / Monday, November 22, 2010 / Notices 71169 

5SIRI was trading at $0.9678 on July 13, 2010. 6C was trading at $4.24 on July 14, 2010. 

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 adopt a $0.50 Strike 

Program for BATS Options in order to 

provide investors with opportunities 

and strategies to minimize losses 

associated with owning a stock 

declining in price. In addition to 

adoption of a $0.50 Strike Program, the 

Exchange proposes to make minor 

modifications to its $1 Strike Program. 

The Exchange is proposing to 

establish strike price intervals of $0.50, 

beginning at $0.50 for certain options 

classes where the strike price is $5.50 or 

less and whose underlying security 

closed at or below $5.00 in its primary 

market on the previous trading day and 

which have national average daily 

volume that equals or exceeds 1,000 

contracts per day as determined by The 

Options Clearing Corporation (‘‘OCC’’) 

during the preceding three calendar 

months. The Exchange also proposes to 

limit the listing of $0.50 strike prices to 

options classes overlying no more than 

20 individual stocks as specifically 

designated by the Exchange. In addition, 

the Exchange proposes to list $0.50 

strike prices on any other option classes 

if those classes are specifically 

designated by other securities exchanges 

that employ a similar $0.50 Strike 

Program under their respective rules. 

The Exchange does not currently offer 

a $0.50 Strike Program, but does offer a 

$1 Strike Program. The proposal would 

provide $0.50 strike offerings to market 

participants, such as traders and retail 

investors, and thereby enhance their 

ability to tailor investing and hedging 

strategies and opportunities in a volatile 

market place. 

By way of example, if an investor 

wants to invest in 5,000 shares of Sirius 

Satellite (‘‘SIRI’’) at $ 0.9678,5 the only 

choice the investor would have today 

would be to buy out-of-the-money calls, 

at the $1.00 strike, or to invest in the 

underlying stock with a total outlay of 

$.96 per share or $4,800. However, if a 

$0.50 strike series were available, an 

investor may be able to invest in 5,000 

shares by purchasing an exercisable inthe-money $0.50 strike call option. It is 

reasonable to assume that with SIRI 

trading at $.96, the $0.50 strike call 

option would trade at an estimated price 

of $.46 to $.48 under normal 

circumstances. This would allow the 

investor to manage 5,000 shares with 

the same upside potential return for a 

cost of only $2,350 (assuming $.47 as a 

call price). 

Similarly, if an investor wanted to 

spend $4,800 for 5,000 shares of SIRI, a 

$0.50 put option that would trade for 

$.01 to $.05 would provide protection 

against a declining stock price in the 

event that SIRI dropped below $0.50 per 

share. In a down market, where high 

volume widely held shares drop below 

$1.00, investors deserve the opportunity 

to hedge downside risk in the same 

manner as investors have with stocks 

greater than $1.00. 

The proposal to allow $0.50 strikes in 

stocks under $5.00 will aid investors by 

offering opportunities to manage risk 

and execute a variety of option 

strategies to improve returns. For 

example, today an investor can enhance 

their yield by selling an out-of-themoney call. Using an example of an 

investor who wants to hedge Citigroup 

(‘‘C’’) which is trading at $4.24,6 that 

investor would be able to choose the 

$4.50 strike which is 6% out-of-themoney or they would be able to choose 

the $5.00 strike which is 17.92% out-ofthe-money, under this proposal. Today, 

this investor only has the latter choice. 

Beyond that, this investor today may 

choose the $6.00 strike which is 41% 

out-of-the-money and offers 

significantly less premium. Pursuant to 

this proposal if this investor had a 

choice to hedge with a $5.50 strike 

option, the investor would have the 

opportunity to sell the option at only 

29% out-of-the-money and would 

improve their return by gaining more 

premium, while also benefitting from 

29% of upside return in the underlying 

equity. 

Based on its experience with $1 strike 

prices, the Exchange does not believe 

that $0.50 strikes will have any impact 

on capacity. Further, the Exchange has 

observed the popularity of $0.50 strikes 

on other exchanges. The open interest in 

the $2.50 August strike series for 

Synovus Financial Corp. (‘‘SNV’’), which 

closed at $2.71 on July 13, 2010, was 

12,743 options; whereas open interest in 

the $2 and $3 August strike series was 

a combined 318 options. The open 

interest in the August $1.50 strike series 

for Ambac Financial Group, Inc. 

(‘‘ABK’’), which closed at $0.7490 on 

July 13, 2010, was 15,879 options 

compared to 8,174 options for the $2 

strike series. The August $2.50 strike 

series had open interest of 22,280 

options, also more than the traditional 

$2 strike series. 

By adopting a $0.50 Strike Program 

investors would be able to better 

enhance returns and manage risk by 

providing investors with significantly 

greater flexibility in the trading of 

equity options that overlie lower price 

stocks by allowing investors to establish 

equity options positions that are better 

tailored to meet their investment, 

trading and risk. 

The Exchange also proposes making a 

corresponding amendment to Rule 19.6, 

Interpretation and Policy .02(b), which 

addresses listing series with $1 intervals 

within $0.50 of an existing strike price 

in the same series. Specifically, to 

account for the overlap with the $0.50 

Strike Program, the Exchange proposes 

to exclude the following series from this 

prohibition: Strike prices of $2, $3, $4, 

$5 and $6 to account for the proposed 

$0.50 Strike Program, which will allow 

strike prices of $5.50. 

Finally, the Exchange proposes 

making an amendment to Rule 19.6, 

Interpretation and Policy .02(a), to 

expand the Exchange’s $1 Strike 

Program. The $1 Strike Program 

currently allows the Exchange to select 

a total of 55 individual stocks on which 

option series may be listed at $1 strike 

price intervals. In order to be eligible for 

selection into the $1 Strike Program, the 

underlying stock must close below $50 

in its primary market on the previous 

trading day. If selected for the $1 Strike 

Program, the Exchange may list strike 

prices at $1 intervals from $1 to $50, but 

no $1 strike price may be listed that is 

greater than $5 from the underlying 

stock’s closing price in its primary 

market on the previous day. The 

Exchange may also list $1 strikes on any 

other option class designated by another 

securities exchange that employs a 

similar Program under their respective 

rules. The Exchange now proposes to 

expand the $1 Strike Program to allow 

the Exchange to select a total of 150 

individual stocks on which option 

series may be listed at $1 strike price 

intervals. The existing restrictions on 

listing $1 strikes would continue, i.e., 

no $1 strike price may be listed that is 

greater than $5 from the underlying 

stock’s closing price in its primary 

market on the previous day, and the 

Exchange is restricted from listing any 

series that would result in strike prices 

being $0.50 apart (unless an option class 

is selected to participate in both the $1 

Strike Program and the $0.50 Strike 

Program). 

With regard to the impact of this 

proposal on system capacity, the 

Exchange has analyzed its capacity and 

represents that it and OPRA have the 


jlentini on DSKJ8SOYB1PROD with NOTICES
71170 Federal Register / Vol. 75, No. 224 / Monday, November 22, 2010 / Notices 

7 15 U.S.C. 78f(b). 

8 15 U.S.C. 78f(b)(5). 

9 15 U.S.C. 78s(b)(3)(A). 

10 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 pre-filing requirement in 

this case. 

11See Securities Exchange Act Release No. 63132 

(October 19, 2010), 75 FR 65541 (October 25, 2010) 

(SR–Phlx–2010–118) (order approving expansion of 

$0.50 Strike Price Program). See also Securities 

Exchange Act Release No. 62420 (June 30, 2010), 75 

FR 39593 (July 9, 2010) (SR–Phlx–2010–72) (order 

approving expansion of $1 Strike Price Program). 

12For 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). 13 17 CFR 200.30–3(a)(12). 

necessary systems capacity to handle 

the potential additional traffic 

associated with the listing and trading 

of an expanded number of series in the 

$1 Strike Program. The Exchange 

believes that the $1 Strike Program has 

provided investors with greater trading 

opportunities and flexibility and the 

ability to more closely tailor their 

investment and risk management 

strategies and decisions to the 

movement of the underlying security. 

Furthermore, the Exchange has not 

detected any material proliferation of 

illiquid options series resulting from the 

narrower strike price intervals. For these 

reasons, the Exchange requests an 

expansion of the current $1 Strike 

Program and the opportunity to provide 

investors with additional strikes for 

investment, trading, and risk 

management purposes. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 7 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 8

in particular in that it is designed to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanisms 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 adopting the 

$0.50 Strike Program will result in a 

benefit to investors by giving them more 

flexibility to closely tailor their 

investment decisions in a greater 

number of securities. Investors would be 

provided with an opportunity to 

minimize losses associated with 

declining stock prices that do not exist 

today. With the increase in active, lowprices securities, the Exchange believes 

that adopting the $0.50 Strike Program 

to allow a $0.50 strike interval below $1 

for strike prices of $5.50 or less is 

necessary to provide investor additional 

opportunity to minimize and manage 

risk. In addition, the Exchange believes 

that expanding the current $1 Strike 

Program will result in a continuing 

benefit to investors by giving them more 

flexibility to closely tailor their 

investment decisions in a greater 

number of securities. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change imposes any 

burden on competition. 

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 written 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 9 and Rule 19b– 

4(f)(6) thereunder.10

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.11 Therefore, the 

Commission designates the proposal 

operative upon filing.12

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–BATS–2010–032 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–BATS–2010–032. 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 website 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–BATS– 

2010–032 and should be submitted on 

or before December 13, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–29344 Filed 11–19–10; 8:45 am] 

BILLING CODE 8011–01–P 


jlentini on DSKJ8SOYB1PROD with NOTICES