Federal Register / Vol. 74, No. 185 / Friday, September 25, 2009 / Notices 49053 

6 15 U.S.C. 78f. 

7 15 U.S.C. 78f(b)(4). 

8 15 U.S.C. 78s(b)(3)(A)(ii). 

9 17 CFR 240.19b–4(f)(2). 10 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

requirements of Section 6 of the Act.6

Specifically, the Exchange believes that 

the proposed rule change is consistent 

with Section 6(b)(4) of the Act,7 in that 

it provides for the equitable allocation 

of reasonable dues, fees and other 

charges among members and other 

persons using any facility or system 

which the Exchange operates or 

controls. The Exchange believes that the 

change is purely administrative in 

nature, as it reflects changes the 

Exchange has already made to other 

portions of its rules. 

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 

No written comments were solicited 

or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing proposed rule change 

has been designated as a fee change 

pursuant to Section 19(b)(3)(A)(ii) of the 

Act 8 and Rule 19b–4(f)(2) thereunder,9

because it establishes or changes a due, 

fee or other charge imposed on members 

by the Exchange. Accordingly, the 

proposal is effective upon filing with 

the Commission. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

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 proposal 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 

No. SR–BATS–2009–029 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 No. 

SR–BATS–2009–029. 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 inspection and copying 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 will also 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 No. 

SR–BATS–2009–029 and should be 

submitted on or before October 16, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–23146 Filed 9–24–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60696; File No. SR–ISE– 

2009–65] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Relating to Strike Price 

Intervals of $0.50 for Options on 

Stocks Trading At or Below $3.00 

September 18, 2009. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on 

September 17, 2009, the International 

Securities Exchange, LLC (the 

‘‘Exchange’’ or the ‘‘ISE’’) filed with the 

Securities and Exchange Commission 

the proposed rule change as described 

in Items I and II below, which items 

have been prepared by the selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of theTerms of Substance of 

the Proposed Rule Change 

The ISE proposes to amend its rules 

in order to establish strike price 

intervals of $0.50, beginning at $1, for 

certain options classes whose 

underlying security closed at or below 

$3 in its primary market on the previous 

trading day. The text of the proposed 

rule change is available on the 

Exchange’s Web site http:// 

www.ise.com, at the principal office of 

the Exchange, 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 

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. 


jlentini on DSKJ8SOYB1PROD with NOTICES
49054 Federal Register / Vol. 74, No. 185 / Friday, September 25, 2009 / Notices 

3The Exchange may not list long-term option 

series (‘‘LEAPS’’) at $1 strike price intervals for any 

class selected for the $1 Strike Program. 

4The Exchange recently amended ISE Rule 503, 

Withdrawal of Approval of Underlying Securities, 

to eliminate the $3 market price per share 

requirement for continued approval for an 

underlying security. The amendment eliminated the 

prohibition against listing additional series or 

options on an underlying security at any time when 

the price per share of such underlying security is 

less than $3. The Exchange explained in that 

proposed rule change that the market price for a 

large number of securities has fallen below $3 in the 

current volatile market environment. See Securities 

Exchange Act Release No. 59347 (February 3, 2009), 

74 FR 6678 (February 10, 2009). 

5Additionally, market participants may be able to 

trade $2.50 strikes on the same option at another 

exchange, if that exchange has elected not to select 

the stock for participation in its own similar $1 

Strike Program. 

6Again, market participants may also be able to 

trade the option at $1 strike price intervals on other 

exchanges, if those exchanges have selected the 

stock for participation in their own similar $1 Strike 

Program. 

7The option on the qualifying stock could also 

have strike prices set at $5, $7.50 and so forth at 

$2.50 intervals (pursuant to Supplementary 

Material .01 to ISE Rule 504) or, if it has been 

selected for the $1 Strike Program, at $4, $5, $6, $7 

and $8. 

8As of July 31, 2009, stocks trading at or below 

$3 include E*Trade Financial Corporation, Ambac 

Financial Group, Inc., Alcatel-Lucent, Federal 

Home Loan Mortgage Corporation (Freddie Mac) 

and Federal National Mortgage Association (Fannie 

Mae). A number of these stocks are widely held and 

actively traded equities, and the options overlying 

these stocks also trade actively on ISE. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to expand the ability of 

investors to hedge risks associated with 

stocks trading at or under $3. Currently, 

ISE Rule 504(d) provides that the 

interval of strike prices of series of 

options on individual stocks may be 

$2.50 or greater where the strike price 

is $25 or less. Additionally, 

Supplementary Material .01 to ISE Rule 

504 allows the Exchange to establish $1 

strike price intervals (the ‘‘$1 Strike 

Program’’) on options classes overlying 

no more than 55 individual stocks 

designated by the Exchange. 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 $1 

Strike Program its own rules.3 The 

Exchange is restricted from listing any 

series that would result in strike prices 

being within $0.50 of a strike price set 

pursuant to Supplementary Material .01 

to ISE Rule 504 at intervals of $2.50. 

The Exchange is now proposing to 

establish strike prices of $1, $1.50, $ 2, 

$2.50, $3 and $3.50 for certain stocks 

that trade at or under $3.00.4 The listing 

of these strike prices will be limited to 

options classes whose underlying 

security closed at or below $3 in its 

primary market on the previous trading 

day, and which have national average 

daily volume that equals or exceeds 

1000 contracts per day as determined by 

The Options Clearing Corporation 

during the preceding three calendar 

months. The listing of $0.50 strike 

prices would be limited to options 

classes overlying no more than five (5) 

individual stocks (the ‘‘$0.50 Strike 

Program’’) as specifically designated by 

the Exchange. The Exchange would also 

be able to list $0.50 strike prices on any 

other option classes if those classes 

were specifically designated by other 

securities exchanges that employed a 

similar $0.50 Strike Program under their 

respective rules. 

Currently, the Exchange may list 

options on stocks trading at $3 at strike 

prices of $1, $2, $3, $4, $5, $6, $7 and 

$8 if they are designated to participate 

in the $1 Strike Program.5 If these stocks 

have not been selected for the 

Exchange’s $1 Strike Program, the 

Exchange may list strike prices of $2.50, 

$5, $7.50 and so forth as provided in 

Supplementary Material .01 to ISE Rule 

504, but not strike prices of $1, $2, $3, 

$4, $6, $7 and $8.6

The Exchange is now proposing to 

amend Supplementary Material .01 to 

ISE Rule 504 by adding new language 

that will permit the Exchange to list 

strike prices on options on a number of 

qualifying stocks that trade at or under 

$3.00, not simply those stocks also 

participating in the $1 Strike Program, 

in finer intervals of $0.50, beginning at 

$1 up to $3.50. Thus, a qualifying stock 

trading at $3 would have option strike 

prices established not just at $2.50, 

$5.00, $7.50 and so forth (for stocks not 

in the Exchange’s $1 Strike Program) or 

just at $1, $2, $3, $4, $5, $6, $7 and $8 

(for stocks designated to participate in 

the $1 Strike Program), but rather at 

strike prices established at $1, $1.50, $2, 

$2.50, $3 and $3.50.7

The Exchange believes that current 

market conditions demonstrate the 

appropriateness of the new strike prices. 

Recently the number of securities 

trading below $3.00 has increased 

dramatically.8 Unless the underlying 

stock has been selected for the $1 Strike 

Program, there is only one possible inthe-money call (at $2.50) to be traded if 

an underlying stock trades at $3.00. 

Similarly, unless the underlying stock 

has been selected for the $1 Strike 

Program, only one out-of-the-money 

strike price choice within 100% of a 

stock price of $3 is available if an 

investor wants to purchase out-of-themoney calls. Stated otherwise, a 

purchaser would need over a 100% 

move in the underlying stock price in 

order to have a call option at any strike 

price other than the $5 strike price 

become in-the-money. If the stock is 

selected for the $1 Strike Program, the 

available strike price choices are 

somewhat broader, but are still greatly 

limited by the proximity of the $3 stock 

price to zero, and the very large percent 

gain or loss in the underlying stock 

price, relative to a higher priced stock, 

that would be required in order for 

strikes set at $1 or away from the stock 

price to become in-the-money and serve 

their intended hedging purpose. 

As a practical matter, a low-priced 

stock by its very nature requires narrow 

strike price intervals in order for 

investors to have any real ability to 

hedge the risks associated with such a 

security or execute other related options 

trading strategies. The current 

restriction on strike price intervals, 

which prohibits intervals of less than 

$2.50 (or $1 for stocks in the $1 Strike 

Program) for options on stocks trading at 

or below $3, could have a negative effect 

on investors. The Exchange believes that 

the proposed $0.50 strike price intervals 

would provide investors with greater 

flexibility in the trading of equity 

options that overlie lower priced stocks 

by allowing investors to establish equity 

option positions that are better tailored 

to meet their investment objectives. The 

proposed new strike prices would 

enable investors to more closely tailor 

their investment strategies and 

decisions to the movement of the 

underlying security. As the price of 

stocks decline below $3 or even $2, the 

availability of options with strike prices 

at intervals of $0.50 could provide 

investors with opportunities and 

strategies to minimize losses associated 

with owning a stock declining in price. 

With regard to the impact on system 

capacity, ISE has analyzed its capacity 

and represents that it and the Options 

Price Reporting Authority have the 

necessary systems capacity to handle 

the additional traffic associated with the 

listing and trading of an expanded 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 74, No. 185 / Friday, September 25, 2009 / Notices 49055 

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) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

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. 60694 

(September 18, 2009) (SR–Phlx–2009–65) (order 

approving a $0.50 strike program substantially the 

same as the $0.50 Strike Program proposed by 

CBOE). 

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). 

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

2 17 CFR 240.19b–4. 

number of series as proposed by this 

filing. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the 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 

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, by 

expanding the ability of investors to 

hedge risks associated with stocks 

trading at or under $3. The proposal 

should create greater trading and 

hedging opportunities and flexibility, 

and provide customers with the ability 

to more closely tailor investment 

strategies to the price movement of the 

underlying stocks, trading in many of 

which is highly liquid. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

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 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

members or other interested parties. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days after the date of 

the filing, or such shorter time as the 

Commission may designate, if 

consistent with the protection of 

investors and the public interest, it has 

become effective pursuant to 19(b)(3)(A) 

of the Act11 thnsp; and Rule 19b– 

4(f)(6) thereunder.12

The Exchange has requested that the 

Commission waive the 30-day operative 

delay to permit the Exchange to respond 

promptly to demand by market 

participants to list qualifying options 

series at $0.50 intervals at about the 

same time that NASDAQ OMX PHLX, 

Inc. does once that exchange receives 

Commission approval of its proposed 

rule change. The Commission today has 

approved SR–Phlx–2009–65,13 and 

therefore finds that waiver of the 

operative delay is consistent with the 

protection of investors and the public 

interest because such waiver will 

encourage fair competition among the 

exchanges. 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 may summarily abrogate 

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–ISE–2009–65 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–ISE–2009–65. 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 inspection and copying 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–ISE–2009–65 and should be 

submitted on or before October 16, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–23113 Filed 9–24–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60695; File No. SR–CBOE– 

2009–069] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to Strike Price 

Intervals of $0.50 for Options on 

Stocks Trading at or Below $3.00 

September 18, 2009. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on 

September 17, 2009, the Chicago Board 

Options Exchange, Incorporated 

(‘‘Exchange’’ or ‘‘CBOE’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 


jlentini on DSKJ8SOYB1PROD with NOTICES