Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Notices 48935 

12 15 U.S.C. 78s(b)(3)(A)(ii). 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

the PFOF fee for complex orders in the 

Penny Pilot Symbols is reasonable and 

equitable because it will benefit 

customers. The Exchange further 

believes that the Exchange’s maker/taker 

fees are not unfairly discriminatory 

because the fee structure is consistent 

with fee structures that exist today at 

other options exchanges. 

Finally, the Exchange believes that 

the proposed fees are fair, equitable and 

not unfairly discriminatory because the 

proposed fees are consistent with price 

differentiation that exists today at other 

option exchanges. Additionally, the 

Exchange believes it remains an 

attractive venue for market participants 

to trade complex orders despite its 

proposed fee change as its fees remain 

competitive with those charged by other 

exchanges for similar trading strategies. 

The Exchange operates in a highly 

competitive market in which market 

participants can readily direct order 

flow to another exchange if they deem 

fee levels at a particular exchange to be 

excessive. 

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 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.12 At any time 

within 60 days of the filing of such 

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. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or 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–ISE–2011–45 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–2011–45. 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 filings 

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 No. SR–ISE–2011– 

45 and should be submitted on or before 

August 30, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–20099 Filed 8–8–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65031; File No. SR–CBOE– 

2011–040] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Proposed Rule 

to Simplify the $1 Strike Price Interval 

Program 

August 4, 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 July 26, 

2011, the Chicago Board Options 

Exchange, Incorporated (‘‘Exchange’’ or 

‘‘CBOE’’) 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 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 

CBOE proposes to amend its rules in 

order to simplify the $1 Strike Price 

Interval Program. The text of the rule 

proposal is available on the Exchange’s 

Web site (http://www.cboe.org/legal), at 

the Exchange’s Office of the Secretary, 

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 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. 


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48936 Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Notices 

3See Securities Exchange Act Release No. 47991 

(June 5, 2003), 68 FR 35243 (June 12, 2003) (SR– 

CBOE–2001–60). 

4See Securities Exchange Act Release No. 57049 

(December 27, 2007), 73 FR 528 (January 3, 2008) 

(SR–CBOE–2007–125). 

5See Securities Exchange Act Release No. 59587 

(March 17, 2009), 74 FR 12414 (March 24, 2009) 

(SR–CBOE–2009–001). 

6See Securities Exchange Act Release No. 62443 

(July 2, 2010), 75 FR 39608 (July 9, 2010) (SR– 

CBOE–2010–064). 

7See Securities Exchange Act Release No. 63772 

(January 25, 2011), 76 FR 5644 (February 1, 2011) 

(SR–CBOE–2011–006). 

8See proposed new subparagraph (i) to Rule 

5.5.01(a)(2). 

9 Id. 

10 Id. 

11See proposed new subparagraph (ii) to Rule 

5.5.01(a)(2). 

12See proposed new subparagraph (iii) to Rule 

5.5.01(a)(2). Rule 5.5A(b)(i) provides, ‘‘[t]he price of 

a security is measured by: (1) For intra-day add-on 

series and next-day series additions, the daily high 

and low of all prices reported by all national 

securities exchanges; (2) for new expiration months, 

the daily high and low of all prices reported by all 

national securities exchanges on the day the 

Exchange determines it preliminary notification of 

new series; and (3) for option series to be added as 

a result of pre-market trading, the most recent share 

price reported by all national securities exchanges 

between 7:45 a.m. and 8:30 a.m. (Chicago time).’’ 

13See proposed new subparagraph (iv) to Rule 

5.5.01(a)(2). The Exchange believes that it is 

important to codify this additional series criterion 

because there have been conflicting interpretations 

among the exchanges that have adopted similar 

programs. The $50 price criterion for additional 

series was intended when the Program was 

originally established (as a pilot) in 2003. See 

Securities Exchange Act Release No. 47991 (June 5, 

2003), 68 FR 35243 (June 12, 2003) (SR–CBOE– 

2001–60) (‘‘CBOE may list an additional expiration 

month provide that the underlying stock closes 

below $20 on its primary market on expiration 

Friday. If the underlying stock closes at or above 

$20 on expiration Friday, CBOE will not list an 

additional month for a $1 strike series until the 

stock again closes below $20.’’) 

14The Exchange notes that a $2 wing is not 

permitted between the standard $20 and $25 strikes 

in the above example. This is because the $2 wings 

are added based on reference to the price of the 

underlying and as being between the standard 

strikes above and below the price of the underlying 

stock. Since the price of the underlying stock 

($24.50) straddles the standard strikes of $20 and 

$25, no $2 wing is permitted between these 

standard strikes. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

Interpretation and Policy .01 to Rule 5.5 

in order to simplify the $1 Strike Price 

Interval Program (‘‘Program’’). 

In 2003, the Commission issued an 

order permitting the Exchange to 

establish the Program on a pilot basis.3

At that time, the underlying stock had 

to close at $20 on the previous trading 

day in order to qualify for the Program. 

The range of available $1 strike price 

intervals was limited to a range between 

$3 and $20 and no strike price was 

permitted that was greater than $5 from 

the underlying stock’s closing price on 

the previous trading day. Series in $1 

strike price intervals were not permitted 

within $0.50 an existing strike [sic]. In 

addition, the Exchange was limited to 

selecting five (5) classes and reciprocal 

listing was permitted. Furthermore, 

LEAPS in $1 strike price intervals were 

not permitted for classes selected to 

participate in the Program. 

The Exchange renewed the pilot 

program on a yearly basis and in 2007, 

the Commission granted permanent 

approval of the Program.4 At that time, 

the Program was expanded to increase 

the upper limit of the permissible strike 

price range from $20 to $50. In addition, 

the number of class selections per 

exchange was increased from five (5) to 

ten (10). 

Since the Program was made 

permanent, the number of class 

selections per exchange has been 

increased from ten (10) classes to 55 

classes 5 and subsequently increased 

from 55 classes to 150 classes.6

Amendments To Simplify Non-LEAPS 

Rule Text 

The most recent expansion of the 

Program was approved by the 

Commission in early 2011 and increased 

the number of $1 strike price intervals 

permitted within the $1 to $50 range.7

This expansion was a proposal of 

another exchange and CBOE submitted 

its filing for competitive reasons. This 

expansion, however, has resulted in 

very lengthy rule text that is 

complicated and difficult to understand. 

CBOE believes that the proposed 

changes to simplify the rule text of the 

Program will benefit market participants 

since the Program will be easier to 

understand and will maintain the 

expansions made to the Program in 

early 2011. Through the current 

proposal, the Exchange also hopes to 

make administration of the Program 

easier, e.g., system programming efforts. 

To simply the rules of the Program and, 

as a proactive attempt to mitigate any 

unintentional listing of improper 

strikes, CBOE is proposing the following 

streamlining amendments: 

• When the price of the underlying 

stock is equal to or less than $20, permit 

$1 strike price intervals with an exercise 

price up to 100% above and 100% 

below the price of the underlying 

stock.8

Æ However, the above restriction 

would not prohibit the listing of at least 

five (5) strike prices above and below 

the price of the underlying stock per 

expiration month in an option class.9

Æ For example, if the price of the 

underlying stock is $2, the Exchange 

would be permitted to list the following 

series: $1, $2, $3, $4, $5, $6 and $7.10

• When the price of the underlying 

stock is greater than $20, permit $1 

strike price intervals with an exercise 

price up to 50% above and 50% below 

the price of the underlying security up 

to $50.11

• For the purpose of adding strikes 

under the Program, the ‘‘price of the 

underlying stock’’ shall be measured in 

the same way as ‘‘the price of the 

underlying security’’ is as set forth in 

Rule 5.5A(b)(i).12

• Prohibit the listing of additional 

series in $1 strike price intervals if the 

underlying stock closes at or above $50 

in its primary market and provide that 

additional series in $1 strike price 

intervals may not be added until the 

underlying stock closes again below 

$50.13

Amendments To Simplify LEAPS Rule 

Text 

The early 2011 expansion of the 

Program permitted for some limited 

listing of LEAPS in $1 strike price 

intervals for classes that participate in 

the Program. The Exchange is proposing 

to maintain the expansion as to LEAPS, 

but simplify the language and provide 

examples of the simplified rule text. 

These changes are set forth 

subparagraph (v) to Rule 5.5.01(b)(2). 

For stocks in the Program, the 

Exchange may list one $1 strike price 

interval between each standard $5 strike 

interval, with the $1 strike price interval 

being $2 above the standard strike for 

each interval above the price of the 

underlying stock, and $2 below the 

standard strike for each interval below 

the price of the underlying stock (‘‘$2 

wings’’). For example, if the price of the 

underlying stock is $24.50, the 

Exchange may list the following 

standard strikes in $5 intervals: $15, 

$20, $25, $30 and $35. Between these 

standard $5 strikes, the Exchange may 

list the following $2 wings: $18, $27 and 

$32.14

In addition, the Exchange may list the 

$1 strike price interval which is $2 

above the standard strike just below the 

underlying price at the time of listing. 

In the above example, since the 

standard strike just below the 

underlying price ($24.50) is $20, the 

Exchange may list a $22 strike. The 

Exchange may add additional long-term 

options series strikes as the price of the 

underlying stock moves, consistent with 

the OLPP. 


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Federal Register / Vol. 76, No. 153 / Tuesday, August 9, 2011 / Notices 48937 

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

16 15 U.S.C. 78f(b)(5). 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

Non-Substantive Amendments to Rule 

Text 

The early 2011 expansion of the 

Program prohibited the listing of $2.50 

strike price intervals for classes that 

participate in the Program. This 

prohibition applies to non-LEAP and 

LEAPS. The Exchange proposes to 

maintain this prohibition and codify it 

in Rule 5.5.01(a)(1) (Program 

Description). 

For ease of reference, the Exchange is 

proposing to add the headings ‘‘Program 

Description,’’ ‘‘Initial and Additional 

Series’’ and ‘‘LEAPS’’ to Rule 5.5.01. 

The Exchange is proposing to more 

accurately reflect the nature of the 

Program and is proposing to make 

stylistic changes throughout Rule 5.5.01 

by adding the phrase ‘‘price interval.’’ 

Lastly, the Exchange is making 

technical changes to Rule 5.5.01, e.g., 

replacing the word ‘‘security’’ with the 

word ‘‘stock.’’ 

The Exchange represents that it has 

the necessary systems capacity to 

support the increase in new options 

series that will result from the proposed 

streamlining changes to the Program. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with Section 

6(b) 15 of the Act, in general, and 

furthers the objectives of Section 

6(b)(5) 16 in particular in that it is 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities, 

and to remove impediments to and 

perfect the mechanisms of a free and 

open market in a manner consistent 

with the protection of investors and the 

public interest. In particular, the 

proposed rule change seeks to reduce 

investor confusion and to simplify the 

provisions of the $1 Strike Price Interval 

Program. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

CBOE 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 

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 

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–CBOE–2011–040 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–CBOE–2011–040. 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 CBOE. 

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 publicly available. All 

submissions should refer to File 

Number SR–CBOE–2011–040 and 

should be submitted on or before 

August 30, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–20172 Filed 8–8–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65025; File No. SR–FINRA– 

2011–027] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Order Approving a 

Proposed Rule Change To Amend 

FINRA Trade Reporting Rules Relating 

to OTC Transactions in Equity 

Securities That Are Part of a 

Distribution and Transfers of Equity 

Securities To Create or Redeem 

Instruments Such as ADRs and ETFs 

August 3, 2011. 

I. Introduction 

On June 9, 2011, the Financial 

Industry Regulatory Authority, Inc. 

(‘‘FINRA’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’), 

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

Securities Exchange Act of 1934 

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

proposed rule change to amend FINRA 

Rules 6282, 6380A, 6380B and 6622 

relating to trade reporting of over-thecounter (‘‘OTC’’) transactions in equity 

securities. The proposed rule change 

was published for comment in the 


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