50796 Federal Register / Vol. 76, No. 158 / Tuesday, August 16, 2011 / Notices 

11 17 CFR 200.30–3(a)(12). 1 15 U.S.C.78s(b)(1). 

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(6). 

4The exercise limits on SPY options set forth in 

FINRA Rule 2360(b)(4), which is not amended by 

this filing, but which incorporate by reference 

options position limits, would correspondingly 

increase to 900,000 contracts. 

5See Securities Exchange Act Release No. 64695 

(June 17, 2011) 76 FR 36942 (June 23, 2011) (SEC 

order approving File No. SR–Phlx–2011–58); 

Securities Exchange Act Release No. 64760 (June 

28, 2011) 76 FR 39143 (July 5, 2011) (Notice of 

Filing and Immediate Effectiveness of File No. SR– 

ISE–2011–34); Securities Exchange Act Release No. 

64928 (July 20, 2011) (File No. SR–CBOE–2011– 

065); Securities Exchange Act Release No. 64966 

(July 26, 2011) (File No. SR–NYSEAmex–2011–50); 

and Securities Exchange Act Release No. 64945 

(July 21, 2011) (File No. SR–NYSEArca–2011–47). 

6For example, options on SPYs, the most actively 

traded options in the U.S. in terms of volume, 

traded a total of 33,341,698 contracts across all 

exchanges from March 1, 2011 through March 16, 

2011. In contrast, over the same time period options 

on the QQQ traded a total of 8,730,718 contracts 

(less than 26.2% of the volume of options on SPYs). 

In addition, for 2010, options on SPY had an 

average daily trading volume of 3.63 million 

contracts, while options on QQQs had an average 

daily trading volume of 963,502. See supra note 5 

PHLX rule filing, at 36942. 

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–BYX–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–BYX–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 website (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 such 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 

publicly available. All submissions 

should refer to File Number SR–BYX– 

2011–017 and should be submitted on 

or before September 6, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–20711 Filed 8–15–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65086; File No. SR–FINRA– 

2011–036] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Increase the Position 

Limit for Options on the Standard and 

Poor’s Depositary Receipts Trust 

August 10, 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 29, 

2011, the Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) 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 FINRA. FINRA 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 this 

filing by 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 the Substance 

of the Proposed Rule Change 

FINRA is proposing to amend FINRA 

Rule 2360 (Options), Supplementary 

Material .03 to increase the position 

limit for options on the Standard and 

Poor’s Depositary Receipts Trust 

(‘‘SPY’’). 

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, at the principal 

office of FINRA 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, 

FINRA 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. FINRA 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 the proposed rule 

change is to amend FINRA Rule 2360, 

Supplementary Material .03 to increase 

the position limit applicable to options 

on the Standard and Poor’s Depositary 

Receipts Trust, which trade under the 

symbol SPY, from 300,000 to 900,000 

contracts 4 to conform to a recent rule 

change by other self-regulatory 

organizations 5 as well as [sic] the 

reasons discussed below. 

Currently, SPY options have a 

position limit of only 300,000 contracts 

on the same side of the market while 

Power Shares QQQ Trust, based on the 

Nasdaq 100 Index® (‘‘QQQ’’) options, 

which are comparable to SPY options 

but have lesser volume,6 have a position 

limit of 900,000 contracts on the same 

side of the market. Given the high 

volume and continuous demand for 

trading SPY options, FINRA believes 

that the current position limit of 

300,000 contracts is inadequate, and 

that such options should, like options 

on QQQ, have a position limit of 

900,000 contracts. 

The position limit on SPY options has 

remained flat for more than five years, 


emcdonald on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 76, No. 158 / Tuesday, August 16, 2011 / Notices 50797 

7The Commission has previously observed that: 

‘‘Since the inception of standardized options 

trading, the options exchanges have had rules 

imposing limits on the aggregate number of options 

contracts that a member or customer could hold or 

exercise. These rules are intended to prevent the 

establishment of options positions that can be used 

or might create incentives to manipulate or disrupt 

the underlying market so as to benefit the options 

position. In particular, position and exercise limits 

are designed to minimize the potential for minimanipulations and for corners or squeezes of the 

underlying market. In addition such limits serve to 

reduce the possibility for disruption of the options 

market itself, especially in illiquid options classes.’’ 

See Securities Exchange Act Release No. 39489 

(December 24, 1997), 63 FR 276, 278 (January 5, 

1998) (File No. SR–CBOE–97–11) (order approving 

increased OEX position and exercise limits). 

8See FINRA Rule 2360(b)(5) for the reporting 

requirements. 

9These procedures have been effective for the 

surveillance of SPY options trading and will 

continue to be employed. 

10 17 CFR 240.13d–1. 

11 17 CFR 240.15c3–1. 

12 15 U.S.C. 78o–3(b)(6). 

13 15 U.S.C. 78s(b)(3)(A). 

14 17 CFR 240.19b–4(f)(6). 

despite the options being the most 

actively traded options for the last two 

years, and is no longer sufficient for 

optimal trading and hedging purposes. 

SPY options are used by large 

institutions and traders as a means to 

invest in or hedge the overall direction 

of the market. The restrictive option 

position limit prevents large customers, 

such as mutual funds and pension 

funds, from using options to gain 

meaningful exposure to, and hedging 

protection through the use of, SPY 

options. Restrictive options position 

limits also can result in lost liquidity in 

both the options market and the equity 

market. The proposed position limit 

increase will remedy this situation to 

the benefit of large as well as retail 

traders, investors, and public customers. 

FINRA also believes that increasing 

position and exercise limits for SPY 

options would lead to a more liquid and 

competitive market environment that 

would benefit customers interested in 

this product. 

In addition, FINRA believes that the 

options on SPY position and exercise 

limits, at their current levels, no longer 

serve their stated purpose. There has 

been a steadfast and significant increase 

over the last decade in the overall 

volume of exchange-traded options; 

position limits, however, have not kept 

up with the volume. Part of this volume 

is attributable to a corresponding 

increase in the number of overall market 

participants, which has, in turn, brought 

about additional depth and increased 

liquidity in exchange-traded options.7

FINRA believes that the existing 

surveillance procedures and reporting 

requirements at FINRA,8 the options 

exchanges, and at the several clearing 

firms are capable of properly identifying 

unusual and/or illegal trading activity. 

These procedures use daily monitoring 

of market movements by automated 

surveillance techniques to identify 

unusual activity in both options and 

underlying stocks.9

Furthermore, large stock holdings 

must be disclosed to the Commission by 

way of Schedules 13D or 13G.10 Options 

positions are part of any reportable 

positions and cannot legally be hidden. 

Moreover, the previously noted Rule 

2360(b)(5) requirement that members 

must file reports with FINRA for any 

customer who held aggregate large long 

or short positions of any single class for 

the previous day will continue to serve 

as an important part of FINRA’s 

surveillance efforts. 

FINRA believes that the current 

financial requirements imposed by 

FINRA and by the Commission 

adequately address concerns that a 

member or its customer may try to 

maintain an inordinately large 

unhedged position in an option, 

particularly on SPY. Current margin and 

risk-based haircut methodologies serve 

to limit the size of positions maintained 

by any one account by increasing the 

margin and/or capital that a member 

must maintain for a large position held 

by it or by its customer. It also should 

be noted that FINRA has the authority 

under FINRA Rule 4210(f)(8)(A) to 

impose a higher margin requirement 

upon a member when FINRA 

determines a higher requirement is 

warranted. In addition, the 

Commission’s net capital rule, Rule 

15c3–1 under the Act,11 imposes a 

capital charge on members to the extent 

of any margin deficiency resulting from 

the higher margin requirement. 

Finally, FINRA believes that while the 

position limit on options on QQQs, 

which as noted are similar to SPY 

options, has been gradually expanded 

from 75,000 contracts to the current 

level of 900,000 contracts, there have 

been no adverse affects on the market as 

a result of this position limit increase. 

Likewise, there have been no adverse 

affects on the market from expanding 

the position limit for SPY options from 

75,000 contracts to the current level of 

300,000 contracts. 

FINRA has filed the proposed rule 

change for immediate effectiveness and 

has requested that the SEC waive the 

requirement that the proposed rule 

change not become operative for 30 days 

after the date of the filing, such that 

FINRA can implement the proposed 

rule change immediately. 

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. FINRA believes that the 

proposed rule filing promotes consistent 

regulation by harmonizing FINRA’s 

position limits for options on SPYs with 

those of the other self-regulatory 

organizations. In addition, FINRA 

believes this proposal will be beneficial 

to large market makers (which generally 

have the greatest potential and actual 

ability to provide liquidity and depth in 

this product), as well as retail traders, 

investors and public customers. 

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 

Because the 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 prior to 30 days from the date 

on which it was filed, or such shorter 

time as the Commission may designate, 

if consistent with the protection of 

investors and the public interest, 

provided that the self-regulatory 

organization has given 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 proposed rule change 

has become effective pursuant to 

Section 19(b)(3)(A) of the Act 13 and 

Rule 19b–4(f)(6)(iii) thereunder.14


emcdonald on DSK2BSOYB1PROD with NOTICES
50798 Federal Register / Vol. 76, No. 158 / Tuesday, August 16, 2011 / Notices 

15 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires that a self-regulatory 

organization submit to the Commission written 

notice of its 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 filing of the proposed rule change, or 

such shorter time as designated by the Commission. 

The Commission notes that FINRA has satisfied this 

requirement. 

16 17 CFR 240.19b–4(f)(6)(iii). 

17For 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). 18 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

A proposed rule change filed under 

Rule 19b–4(f)(6) 15 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b–4(f)(6)(iii),16 the 

Commission may designate a shorter 

time if such action is consistent with the 

protection of investors and the public 

interest. FINRA has requested that the 

Commission waive the 30-day operative 

delay so that the proposal may become 

operative immediately upon filing. The 

Commission believes that waiving the 

30-day operative delay is consistent 

with the protection of investors and the 

public interest, because increasing 

position and exercise limits for SPY 

options would lead to a more liquid and 

competitive market environment that 

would benefit customers interested in 

this product. Additionally, it would 

allow FINRA to seamlessly continue to 

offer traders and the investing public 

the ability to use this product as an 

effective hedging and trading vehicle. 

Lastly, it will enable FINRA’s position 

and exercise limits for SPDR® options to 

be consistent with those of other 

exchanges that have already adopted the 

higher position and exercise limits. 

Therefore, the Commission designates 

the proposal operative upon filing.17

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. 

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–2011–036 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–2011–036. 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 No. 

SR–FINRA–2011–036 and should be 

submitted on or before September 6, 

2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–20707 Filed 8–15–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–65081; File No. SR–BATS– 

2011–027] 

Self-Regulatory Organizations; BATS 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change to Extend Pilot Program 

Related to Trading Pauses Due to 

Extraordinary Market Volatility 

August 9, 2011. 

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 August 8, 

2011, BATS Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BATS’’) 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 is filing with the 

Commission a proposal to extend a pilot 

program previously approved by the 

Commission related to Rule 11.18, 

entitled ‘‘Trading Halts Due to 

Extraordinary Market Volatility.’’ 

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, 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 

forth in Sections A, B, and C below, of 

the most significant parts of such 

statements. 


emcdonald on DSK2BSOYB1PROD with NOTICES