5642 Federal Register / Vol. 76, No. 21 / Tuesday, February 1, 2011 / Notices 

12 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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–EDGA–2011–01. 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 

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 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–EDGA– 

2011–01 and should be submitted on or 

before February 22, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–2131 Filed 1–31–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63771; File No. SR–ISE– 

2011–06] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Regarding the Listing of 

Option Series With $1 Strike Prices 

January 25, 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 January 

14, 2011, the International Securities 

Exchange, LLC (‘‘ISE’’ or the ‘‘Exchange’’) 

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 

The Exchange proposes to amend its 

rules regarding the listing of $1 strike 

prices. 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, 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 

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 Exchange proposes to amend 

Supplementary Material .01 to ISE Rule 

504 to improve the operation of the $1 

Strike Program. Currently, the $1 Strike 

Program only allows the listing of new 

$1 strikes within $5 of the previous 

day’s closing price. In certain 

circumstances this has led to situations 

where there are no at-the-money $1 

strikes for a day, despite significant 

demand. For instance, on November 15, 

2010, the underlying shares of Isilon 

Systems Inc. opened at $33.83. It had 

closed the previous trading day at 

$26.29. Options were available in $1 

intervals up to $31, but because of the 

restriction to only listing within $5 of 

the previous close, the Exchange was 

not able to add $32, $33, $34, $36, $37 

or $38 strikes during the day. 

The Exchange proposes that $1 

interval strike prices be allowed to be 

added immediately within $5 of the 

official opening price in the primary 

listing market. Thus, on any day, $1 

Strike Program strikes may be added 

within $5 of either the opening price or 

the previous day’s closing price. 

On occasion, the price movement in 

the underlying security has been so 

great that listing within $5 of either the 

previous day’s closing price or the day’s 

opening price will leave a gap in the 

continuity of strike prices. For instance, 

if an issue closes at $14 one day, and the 

next day opens above $27, the $21 and 

$22 strikes will be more than $5 from 

either benchmark. The Exchange 

proposes that any such discontinuity be 

avoided by allowing the listing of all $1 

Strike Program strikes between the 

closing price and the opening price. 

Additionally, issues that are in the $1 

Strike Program may currently have 

$2.50 interval strike prices added that 

are more than $5 from the underlying 

price or are more than a nine months to 

expiration (long-term options series). In 

such cases, the listing of a $2.50 interval 

strike may lead to discontinuities in 

strike prices and also a lack of parallel 

strikes in different expiration months of 

the same issue. For instance, under the 

current rules, the Exchange may list a 

$12.50 strike in a $1 Strike Program 

issue where the underlying price is $24. 

This allowance was provided to avoid 

too large of an interval between the 

standard strike prices of $10 and $15. 

The unintended consequence, however, 

is that if the underlying price should 

decline to $16, the Exchange would not 

be able to list a $12 or $13 strike. If the 

underlying stayed near this level at 

expiration, a new expiration month 

would have the $12 and $13 strike but 

not the $12.50, leading to a disparity in 

strike intervals in different months of 

the same option class. This has also led 

to investor confusion, as they regularly 

request the addition of inappropriate 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 76, No. 21 / Tuesday, February 1, 2011 / Notices 5643 

3Rule 504A codifies the limitation on strike price 

ranges outlined in the OLPP, which, except in 

limited circumstances, prohibits options series with 

an exercise price more than 100% above or below 

the price of the underlying security if that price is 

$20 or less. If the price of the underlying security 

is greater than $20, the Exchange shall not list new 

options series with an exercise price more than 

50% above or below the price of the underlying 

security. 

4 15 U.S.C. 78s(b)(1). 

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

6 15 U.S.C. 78f(b)(5). 

7 15 U.S.C. 78s(b)(3)(A). 

8 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. 

9See Securities Exchange Act Release No. 63773 

(January 25, 2011) (SR–NYSEAmex–2010–109). See 

also Securities Exchange Act Release No.63770 

(January 25, 2011) (SR–NYSEArca–2010–106). 

10For 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). 

strikes so as to roll a position from one 

month to another at the same strike 

level. 

To avoid this problem, the Exchange 

proposes to prohibit $2.50 interval 

strikes below $50 in all $1 Strike 

Program issues, including long term 

option series. At each standard $5 

increment strike more than $5 from the 

price of the underlying security, the 

Exchange proposes to list the strike $2 

above the standard strike for each 

interval above the price of the 

underlying security, and $2 below the 

standard strike, for each interval below 

the price of the underlying security, 

provided it meets the Options Listing 

Procedures Plan (‘‘OLPP’’) Provisions in 

ISE Rule 504A.3 For instance, if the 

underlying security was trading at $19, 

the Exchange could list, for each month, 

the following strikes: $3, $5, $8, $10, 

$13, $14, $15, $16, $17, $18, $19, $20, 

$21, $22, $23, $24, $25, $27, $30, $32, 

$35, and $37. 

Instead of $2.50 strikes for long-term 

options, the Exchange proposes to list 

one long-term $1 Strike option series 

strike in the interval between each 

standard $5 strike, with the $1 Strike 

being $2 above the standard strike price 

for each interval above the price of the 

underlying security, and $2 below the 

standard strike price, for each interval 

below the price of the underlying 

security. In addition, the Exchange may 

list the long-term $1 strike which is $2 

above the standard strike just below the 

underlying price at the time of listing, 

and may add additional long-term 

options series strikes as the price of the 

underlying security moves, consistent 

with the OLPP. For instance, if the 

underlying is trading at $21.25, longterm strikes could be listed at $15, $18, 

$20, $22, $25, $27, and $30. If the 

underlying subsequently moved to $22, 

the $32 strike could be added. If the 

underlying moved to $19.75, the $13, 

$10, $8, and $5 strikes could be added. 

The Exchange also proposes that 

additional long-term option strikes may 

not be listed within $1 of an existing 

strike until less than nine months to 

expiration. 

Finally, the Exchange represents that 

it has the necessary systems capacity to 

support the small increase in new 

options series that will result from the 

changes to the $1 Strike Program. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 4 and the rules and regulations 

thereunder and, in particular, the 

requirements of section 6(b) of the Act.5

Specifically, the Exchange believes the 

proposed rule change is consistent with 

Section 6(b)(5) 6 requirements that the 

rules of an exchange be designed to 

promote just and equitable principles of 

trade, to prevent fraudulent and 

manipulative acts, to remove 

impediments to and perfect the 

mechanism for a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. In particular, the 

proposed rule change seeks to reduce 

investor confusion and address issues 

that have arisen in the operation of the 

$1 Strike Program by providing a 

consistent application of strike price 

intervals for issues in the $1 Strike 

Program. 

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 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 7 and Rule 19b– 

4(f)(6) thereunder.8

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.9

Therefore, the Commission designates 

the proposal operative upon filing.10

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–ISE–2011–06 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–2011–06. 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 


srobinson on DSKHWCL6B1PROD with NOTICES
5644 Federal Register / Vol. 76, No. 21 / Tuesday, February 1, 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 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). 

5Rule 5.5A codifies the limitation on strike price 

ranges outlined in the OLPP, which, except in 

limited circumstances, prohibits options series with 

an exercise price more than 100% above or below 

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–ISE– 

2011–06 and should be submitted on or 

before February 22, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–2118 Filed 1–31–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63772; File No. SR–CBOE– 

2011–006] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Regarding the Listing of 

Option Series With $1 Strike Prices 

January 25, 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 January 

12, 2011, the Chicago Board Options 

Exchange, Incorporated (‘‘CBOE’’or the 

‘‘Exchange’’) 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 filed the 

proposal as a ‘‘non-controversial’’ 

proposed rule change pursuant to 

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

Rule 19b–4(f)(6) thereunder.4 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 

regarding the listing of $1 strike prices. 

The text of the rule proposal is available 

on the Exchange’s Web site (http:// 

www.cboe.org/legal), at the Exchange’s 

principal office, 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. 

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 

to improve the operation of the $1 Strike 

Program. 

Currently, the $1 Strike Program only 

allows the listing of new $1 strikes 

within $5 of the previous day’s closing 

price. In certain circumstances this has 

led to situations where there are no atthe-money $1 strikes for a day, despite 

significant demand. For instance, on 

November 15, 2010, the underlying 

shares of Isilon Systems Inc. opened at 

$33.83. It had closed the previous 

trading day at $26.29. Options were 

available in $1 intervals up to $31, but 

because of the restriction to only listing 

within $5 of the previous close, the 

following strikes were not permitted to 

be added during the day: $32, $33, $34, 

$36, $37 and $38. 

The Exchange proposes that $1 

interval strike prices be allowed to be 

added immediately within $5 of the 

official opening price in the primary 

listing market. Thus, on any day, $1 

Strike Program strikes may be added 

within $5 of either the opening price or 

the previous day’s closing price. On 

occasion, the price movement in the 

underlying security has been so great 

that listing within $5 of either the 

previous day’s closing price or the day’s 

opening price will leave a gap in the 

continuity of strike prices. For instance, 

if an issue closes at $14 one day, and the 

next day opens above $27, the $21 and 

$22 strikes will be more than $5 from 

either benchmark. The Exchange 

proposes that any such discontinuity be 

avoided by allowing the listing of all $1 

Strike Program strikes between the 

closing price and the opening price. 

Additionally, issues that are in the $1 

Strike Program may currently have 

$2.50 interval strike prices added that 

are more than $5 from the underlying 

price or are more than a nine months to 

expiration (long-term options series). In 

such cases, the listing of a $2.50 interval 

strike may lead to discontinuities in 

strike prices and also a lack of parallel 

strikes in different expiration months of 

the same issue. For instance, under the 

current rules, the Exchange may list a 

$12.50 strike in a $1 Strike Program 

issue where the underlying price is $24. 

This allowance was provided to avoid 

too large of an interval between the 

standard strike prices of $10 and $15. 

The unintended consequence, however, 

is that if the underlying price should 

decline to $16, the Exchange would not 

be able to list a $12 or $13 strike. If the 

underlying stayed near this level at 

expiration, a new expiration month 

would have the $12 and $13 strike but 

not the $12.50, leading to a disparity in 

strike intervals in different months of 

the same option class. This has also led 

to investor confusion, as they regularly 

request the addition of inappropriate 

strikes so as to roll a position from one 

month to another at the same strike 

level. 

To avoid this problem, the Exchange 

may not list series with $2.50 intervals 

(e.g., $12.50, $17.50) below $50 under 

Interpretation and Policy .05 of Rule 5.5 

($2.50 Strike Price Program) for any 

issue included within the $1 Strike 

Program, including long term option 

series. At each standard $5 increment 

strike more than $5 from the price of the 

underlying security, the Exchange 

proposes to list the strike $2 above the 

standard strike for each interval above 

the price of the underlying security, and 

$2 below the standard strike, for each 

interval below the price of the 

underlying security, provided it meets 

the Options Listing Procedures Plan 

(‘‘OLPP’’) Provisions in Rule 5.5A.5 For 


srobinson on DSKHWCL6B1PROD with NOTICES