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 


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Federal Register / Vol. 76, No. 21 / Tuesday, February 1, 2011 / Notices 5645 

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. 

6 15 U.S.C. 78s(b)(1). 

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 Exchange 

has satisfied this requirement. 

11See 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). 

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). 

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 

proposed changes to the $1 Strike 

Program. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the Act 6

and the rules and regulations 

thereunder and, in particular, the 

requirements of Section 6(b) of the Act.7

Specifically, the Exchange believes the 

proposed rule change is consistent with 

the Section 6(b)(5) 8 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 to 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 

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 

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–CBOE–2011–006 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–2011–006. 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 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 


srobinson on DSKHWCL6B1PROD with NOTICES
5646 Federal Register / Vol. 76, No. 21 / Tuesday, February 1, 2011 / Notices 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 63463 

(December 8, 2010), 75 FR 77923 (‘‘Notice’’). 

4Rule 903 Commentary .06(b). 

5See id. 

6See id. The standard strike interval for LongTerm Equity Option Series (LEAPs) is $2.50 where 

the strike price is $25 or less. See Rule 903 

Commentary .05. However, under a separate 

provision of the rules, the Exchange may list series 

with $1 strike prices up to $5 in LEAPS in up to 

200 option classes on individual stocks, provided 

the $1 intervals are not within $0.50 of an existing 

series with a $2.50 strike price. See Rule 903 

Commentary .06(e). This provision would not 

change under the current proposal. 

7Rule 903A 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, an exchange may not list new 

options series with an exercise price more than 

50% above or below the price of the underlying 

security. 

available publicly. All submissions 

should refer to File Number SR–CBOE– 

2011–006 and should be submitted on 

or before February 22, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–2119 Filed 1–31–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63773; File No. SR– 

NYSEAmex–2010–109] 

Self-Regulatory Organizations; NYSE 

Amex LLC; Order Granting Approval of 

Proposed Rule Change Regarding the 

Listing of Options Series With $1 

Strike Prices 

January 25, 2011. 

I. Introduction 

On November 24, 2010, NYSE Amex 

LLC (‘‘NYSE Amex’’ or ‘‘Exchange’’) 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 allow the Exchange to modify 

the operation of the $1 Strike Price 

Program. The proposed rule change was 

published for comment in the Federal 

Register on December 14, 2010.3 The 

Commission received no comment 

letters on the proposal. This order 

approves the proposed rule change. 

II. Description of the Proposal 

NYSE Amex has proposed to amend 

Rule 903 Commentary .06 to modify the 

operation of the $1 Strike Price Program. 

Currently, the $1 Strike Price Program 

allows the listing of new series with 

strikes at $1 intervals only if such series 

have strike prices within $5 of the 

previous day’s closing price in the 

primary listing market.4 The proposal 

would allow the Exchange also to: (a) 

List new series with $1 interval strike 

prices within $5 of the official opening 

price in the primary listing market, and 

(b) add $1 interval strike prices between 

the closing price and the opening price, 

regardless of whether such strikes are 

within $5 of the previous day’s closing 

price or the day’s opening price. 

In support of allowing the listing of $1 

interval strike between the closing and 

opening prices, the Exchange stated 

that, on occasion, the price movement 

in an underlying security has been so 

great that listing series with strikes 

within $5 of the previous day’s closing 

price and the day’s opening price would 

leave a gap in the continuity of strike 

prices. Thus, if an issue closes at $14 

one day, and the next day opens above 

$27, the $21 and $22 strikes would be 

more than $5 from either benchmark. 

The Exchange proposed that any such 

discontinuity be avoided by allowing 

the listing of options on all $1 interval 

strike prices that fall between the 

previous day’s closing price and the 

opening price. 

The Exchange also has proposed to 

prohibit the listing of $2.50 interval 

strikes below $50 in all classes chosen 

for the $1 Strike Price Program, and in 

all long-term option series. According to 

the Exchange, this change is designed to 

eliminate discontinuities in strike prices 

and a lack of parallel strikes in different 

expiration months of the same issue. 

Currently, Exchange rules provide that 

the Exchange may not list series within 

$1 strike price intervals within $0.50 of 

an existing strike price in the same 

class, unless the class in question has 

been selected to participate in the $0.50 

Strike Program.5 In addition, Exchange 

rules currently stipulate that the 

Exchange may not list series with $1 

strike price intervals for any long-term 

options (i.e., options having greater than 

nine months to expiration) under the $1 

Strike Price Program.6

However, as the Exchange noted in its 

proposal, due to the prohibition on $1 

strike price intervals within $0.50 of an 

existing strike price, the existence of 

series with $2.50 interval strikes for 

classes selected for the $1 Strike Price 

Program could lead to discontinuities in 

strike prices and a lack of parallel 

strikes in different expiration months of 

the same issue. For example, if a $12.50 

strike series was open in a class selected 

for the $1 Strike Price Program, the 

Exchange would not be able to list series 

with a $12 or $13 strike, potentially 

resulting in sequence of strike prices at 

irregular intervals (i.e., $10, $11, $12.50, 

$14, and $15). 

To replace these now-forbidden $2.50 

interval strikes, the Exchange proposes 

to allow the listing of one additional 

series within each natural $5 interval, as 

follows. The Exchange proposed to 

permit the listing of a series with a 

strike $2 above the $5-interval strike for 

each such $5-interval strike above the 

price of the underlying security at the 

time of listing. Conversely, the 

Exchange’s proposal would permit the 

listing of a series with a strike $2 below 

the $5-interval strike for each such $5- 

interval strike below the price of the 

underlying security at the time of 

listing. For example, if the underlying 

security was trading at $19, the 

Exchange could list a $27 strike between 

the $25 and the $30 strikes, and a $32 

strike between the $30 and $35 strikes; 

as well as a $13 strike between the $10 

and $15 strikes, and an $8 strike 

between the $10 and $15 strikes. The 

Exchange also notes that each such 

additional series may be listed only if 

such listing is consistent with the 

Options Listing Procedures Plan 

(‘‘OLPP’’) Provisions in Rule 903A.7 The 

foregoing provisions would apply to all 

classes selected for the $1 Strike Price 

Program, both with respect to standard 

and long-term options. In addition, 

since series with $1-interval strikes are 

not permitted for most long-term 

options, the proposal would allow the 

Exchange to list the long-term strike that 

is $2 above the $5-interval just below 

the underlying price at the time of 

listing. For example, if the underlying 

security is trading at $21.25, this 

provision would allow the Exchange to 

add a $22 strike ($2 above the $20 

strike) for the long-term option series. 

In support of its proposal, the 

Exchange stated that the proposed rule 

change seeks to reduce investor 

confusion resulting from discontinuous 

strike prices that has arisen in the 

operation of the $1 Strike Price Program, 

by providing a consistent application of 

strike price intervals for issues in the $1 

Strike Price Program. 

The Exchange further represented that 

it has the necessary systems capacity to 

support the potential increase in new 

options series that will result from the 

proposed changes to the $1 Strike Price 

Program. 


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