7634 Federal Register / Vol. 77, No. 29 / Monday, February 13, 2012 / Notices 

59 17 CFR 200.30–3(a)(57). 

1 ‘‘iShares®’’ is a registered trademark BlackRock 

Institutional Trust Company, N.A. 

2 15 U.S.C. 78s(b)(1). 

3 17 CFR 240.19b–4. 

4 17 CFR 240.19b–4(f)(6). 

5 ‘‘iShares®’’ is a registered trademark BlackRock 

Institutional Trust Company, N.A. 

6As of July 31, 2011, the average daily volume 

(‘‘ADV’’) over the previous three calendar months 

was 60,087,539 for SLV and 13,881,380 for USO. 

7These exchanges include, in addition to 

NYSEArca: NYSEAmex (‘‘Amex’’), BATS Global 

Markets (‘‘BATS’’), Boston Options Exchange 

(‘‘BOX’’), Chicago Board Options Exchange 

(‘‘CBOE’’), C2 Options Exchange (‘‘C2’’), 

International Securities Exchange (‘‘ISE’’), 

NASDAQ OMX PHLX (‘‘PHLX’’) and NASDAQ 

Options Exchange (‘‘NOM’’). 

disapproved by March 5, 2012. Any 

person who wishes to file a rebuttal to 

any other person’s submission must file 

that rebuttal by March 19, 2012. 

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 email to rulecomments@sec.gov. Please include File 

Number SR–NYSE–2011–55 or SR– 

NYSEAmex–2011–84 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–NYSE–2011–55 or SR– 

NYSEAmex–2011–84. This file number 

should be included on the subject line 

if email 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 

10:00 a.m. and 3:00 p.m. 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–NYSE– 

2011–55 or SR–NYSEAmex–2011–84 

and should be submitted on or before 

March 5, 2012. Rebuttal comments 

should be submitted by March 19, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority. 59

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3219 Filed 2–10–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66350; File No. SR– 

NYSEArca–2012–14] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Amending Commentary 

.05 to NYSE Arca Rule 6.4 To Allow 

Trading of Options on iShares® Silver 

Trust 1 and United States Oil Fund at 

$0.50 Strike Price Intervals Where the 

Strike Price Is Less Than $75 

February 7, 2012. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on February 

6, 2012, NYSE Arca, Inc. (the 

‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with 

the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the Exchange. The 

Exchange has designated the proposed 

rule change as constituting a noncontroversial rule change under Rule 

19b–4(f)(6) under the Act,4 which 

renders the proposal effective upon 

filing with 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 Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Commentary .05 to NYSE Arca Rule 6.4 

to allow trading of options on iShares®

Silver Trust 5 and United States Oil 

Fund at $0.50 strike price intervals 

where the strike price is less than $75. 

The text of the proposed rule change is 

available at the Exchange, the 

Commission’s Public Reference Room, 

and www.nyse.com. 

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 purpose of this filing is to amend 

Commentary .05 of Rule 6.4 to allow 

trading of options on iShares® Silver 

Trust (‘‘SLV’’ or ‘‘SLV Trust’’) and 

United States Oil Fund (‘‘USO’’ or 

‘‘USO Fund’’) at $0.50 strike price 

intervals where the strike price is less 

than $75. 

The Underlying ETFs 

Two popular exchange traded funds 

(‘‘ETFs’’), which are known on the 

Exchange as Exchange-Traded Fund 

Shares, underlie SLV and USO options.6

SLV and USO options are currently 

traded on several exchanges.7

The iShares® Silver Trust is a grantor 

trust that is designed to provide a 

vehicle for investors to own interests in 

silver. The purpose of the SLV Trust is 

to own silver transferred to the trust in 

exchange for shares that are issued by 

the trust. Each of such shares represents 

a fractional undivided beneficial 

interest in the net assets of the SLV 

Trust. The objective of the SLV Trust is 

for the value of the iShares® to reflect, 

at any given time, the price of silver 

owned by the trust at that time. 

The United States Oil Fund is a 

domestic exchange traded security 

designed to track the movements of 

light, sweet crude oil that is known as 

West Texas Intermediate. The 

investment objective of the USO Fund is 

for the changes in percentage terms of 


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Federal Register / Vol. 77, No. 29 / Monday, February 13, 2012 / Notices 7635 

8See, e.g., CBOE Rule 5.5 Interpretation and 

Policy .08; and NOM Chapter IV Section 6, 

Supplementary Material .01 to Section 6. 

9See Securities Exchange Act Release No. 64189 

(April 5, 2011), 76 FR 20066 (April 11, 2011) (SR– 

CBOE–008) (order granting approval of $0.50 and 

$1 strike price intervals for certain volatility options 

where the strike prices are less than $75 and 

between $75 and $150, respectively). Other 

Exchanges have submitted similar immediately 

effective proposals. See Securities Exchange Act 

Release Nos. 64325 (April 22, 2011), 76 FR 23632 

(April 27, 2011) (SR–NYSEAmex–2011–26); 64324 

(April 22, 2011), 76 FR 23849 (April 28, 2011) (SR– 

NYSEArca–2011–19); 64359 (April 28, 2011), 76 FR 

25390 (May 4, 2011) (SR–ISE–2011–27); and 64589 

(June 2, 2011), 76 FR 33387 (June 8, 2011) (SR– 

Phlx–2011–74). 

10Figures were based on July 2011 data using 

symbols with a 2011 expiration date. 

11The noted $0.50 intervals were established per 

the $0.50 Program found in Commentary .13 of Rule 

6.4. The $0.50 Program has inherent price 

limitations that make it unsuitable for SLV and 

USO options. 

12The Exchange is not aware of any material 

market surveillance issues arising because of the 

$0.50 or $1.00 the strike price intervals. 

13Particularly between options markets and 

futures markets that also trade options on futures. 

14Per the NYMEX Web site, http:// 

www.cmegroup.com/product-codeslisting/nymexmarket.html, options on crude oil futures are listed 

nine years forward whereby consecutive months are 

listed for the current year and the next five years, 

and in addition, the June and December contract 

months are listed beyond the sixth year. Additional 

months will be added on an annual basis after the 

December contract expires, so that an additional 

June and December contract would be added nine 

years forward, and the consecutive months in the 

sixth calendar year will be filled in. 

15Per the NYMEX Web site, http:// 

www.cmegroup.com/product-codeslisting/nymexmarket.html, options on silver futures are listed for 

the first three months at strike price intervals of 

$.05. An additional ten strike prices will be listed 

at $.25 increments above and below the highest and 

lowest five-cent increment, respectively, beginning 

with the strike price evenly divisible by $.25. For 

all other trading months, strike prices are at an 

interval of $.05, $.10, and $.25 per specified 

parameters. 

its units’ net asset value to reflect the 

changes in percentage terms of the spot 

price of light, sweet crude oil delivered 

to Cushing, Oklahoma, as measured by 

the changes in the price of the futures 

contract for light, sweet crude oil traded 

on the New York Mercantile Exchange 

(the ‘‘NYMEX’’), less USO’s expenses. 

The ETFs underlying SLV and USO 

options, which are listed on NYSE Arca, 

are not affected or changed by this 

filing. 

The Proposal 

Commentary .05 of Rule 6.4 currently 

states that the interval of strike prices of 

series of options on Exchange-Traded 

Fund Shares will be $1 or greater where 

the strike price is $200 or less and $5 

or greater where the strike price is more 

than $200. This is similar to the 

applicable ETF option interval 

standards of other options markets.8

The Commission has recently 

approved a CBOE proposal to allow 

$0.50 strike price intervals for options 

on certain ETFs and individual equity 

securities on which CBOE would 

calculate volatility (known as ‘‘volatility 

options’’).9 The Exchange is, in this 

filing, proposing $0.50 strike price 

intervals for options on ETFs similarly 

to what CBOE proposed in respect of 

volatility options. The Exchange notes 

that its $0.50 strike price interval 

proposal is, however, limited in several 

respects. First, the proposed $0.50 

intervals are limited to only one type of 

underlying instrument, namely 

Exchange-Traded Fund Shares. Second, 

the $0.50 intervals are proposed for two 

option products, namely iShares® Silver 

Trust and United States Oil Fund. And 

third, the intervals are limited to strike 

prices that are less than $75. 

Other than options in $0.50 strike 

price intervals approved for CBOE as 

noted, options on ETFs or Exchange 

Trades Fund Shares trade at $1 intervals 

where the strike price is below $200. As 

demonstrated in this filing, however, 

this $1 strike price interval is no longer 

always appropriate, and in fact may be 

counter-productive and more costly, for 

ETF option traders and investors that 

are trying to achieve optimum trading, 

hedging, and investing objectives. 

The Exchange believes that reducing 

these strike price intervals would make 

excellent economic sense, would allow 

better tailored investing and hedging 

opportunities, and would potentially 

enable traders and investors to save 

money. 

The number of low-priced strike 

interval options have increased 

significantly over the last decade, such 

that now there are approximately 935 

equity options and 225 ETF options 

listed at $1 strike price intervals.10

There are also, in addition to the 

newly enabled CBOE $0.50 strike price 

options, approximately 7 options listed 

at $0.50 strike price intervals pursuant 

to the $0.50 Strike Program.11 Clearly, 

however, this is no longer sufficient in 

the current volatile and economically 

challenging environment. Traders and 

investors are requesting more lowpriced interval ETF options so that they 

may better tailor investing and hedging 

strategies and opportunities.12

By way of example, if an investor 

wants to gain exposure to the silver 

market or hedge his position, he may 

invest in options on the iShares® Silver 

Trust (SLV). Today an investor must 

choose a strike price that might lack the 

precision he is looking for in order to 

gain or reduce exposure to the silver 

market. Thus, an investor executing a 

covered call strategy may be looking to 

sell calls on SLV. Assume the investor’s 

SLV cost basis is $38.35. The nearest 

out-of-the-money strike call is the 39.00 

strike, which is 1.69% out of the money. 

If the 38.50 strike were available, 

however, the investor could sell calls in 

a strike price only .39% out-of-themoney, thus offering 1.29% additional 

risk protection. To an investor writing 

covered calls on an equity position, this 

extra protection could be significant on 

an annual basis. 

With United States Oil Fund (USO), a 

similar lack of precision exists at the 

current strike prices. For an investor 

looking to purchase out-of-the-money 

put protection against a USO purchase 

of $31.65, the investor must choose the 

31.00 strike, which is 2.05% out-of-themoney. If the 31.50 strike were 

available, the investor could avail 

himself of a superior strike price that is 

only .47% out of the money, thus 

offering 1.58% additional protection. 

The smaller strike price offers an 

increased amount of downside 

protection to the investor at a more 

precisely factored cost for the hedging 

opportunity. 

Moreover, an investor may want to 

execute an investment or hedging 

strategy whereby the investor would 

close one position and open another 

through use of a complex order. 

Implementing $0.50 strike intervals 

would, again, offer more precision and 

an opportunity to improve returns and/ 

or risk protection. Thus, using the 

previous SLV example, the investor who 

purchased SLV at $38.35 and sold the 

$38.50 call might later wish to purchase 

a call to close the original position and 

roll into a new position as the stock 

moves away from the original strike 

price. By offering $0.50 strike prices, the 

investor may be able to again avail 

himself of a better return or hedging 

opportunity. 

The Exchange also believes that with 

the increase in inter-market trading and 

hedging,13 the ability to offer potentially 

similarly-situated products at more 

similar strike intervals gains 

importance. Thus, options on futures 

underlying USO and SLV are traded at 

$0.50 and lower strike price intervals. 

Options on USO futures listed for 

trading on the NYMEX have $0.50 strike 

price intervals.14 And options on silver 

futures listed on NYMEX have strike 

price intervals as low as $0.05.15 The 

Exchange is not, in this filing, proposing 

to go to sub-$0.50 strike price intervals 

but is proposing reasonable, requested, 

and needed $0.50 intervals only where 


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7636 Federal Register / Vol. 77, No. 29 / Monday, February 13, 2012 / Notices 

16A trader or investor may, for example, use a 

commodity-oriented ETF such as the SLV Trust or 

USO Fund to counter-balance (hedge) an equity or 

ETF position that tends to move inversely to the 

price movement of SLV or USO. 

17 15 U.S.C. 78f(b). 

18 15 U.S.C. 78f(b)(5). 

19 15 U.S.C. 78s(b)(3)(A). 

20 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 Commission 

has waived the five-day prefiling requirement. 

21See Securities Exchange Act Release No. 34– 

66285 (February 1, 2012) (SR–Phlx–2011–175). 

22For 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). 23 17 CFR 200.30–3(a)(12). 

the strike price of the underlying is less 

than $75. 

By establishing $0.50 strike intervals 

for SLV and USO options, investors 

would have greater flexibility for trading 

and hedging the underlying ETFs or 

hedging market exposure 16 through 

establishing appropriate options 

positions tailored to meet their 

investment, trading and risk profiles. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Securities Exchange 

Act of 1934 (the ‘‘Act’’),17 in general, 

and furthers the objectives of Section 

6(b)(5) of the Act,18 in particular, 

because it is designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to remove 

impediments to and perfect the 

mechanisms of a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest. This would be achieved 

by establishing $0.50 strike intervals for 

SLV and USO options so that traders, 

market participants, and investors in 

general may have greater flexibility for 

trading and hedging the underlying 

ETFs or hedging market exposure 

through establishing appropriate 

options positions tailored to meet their 

investment, trading and risk profiles. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will 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 

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 19 and Rule 19b– 

4(f)(6) thereunder.20

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 those of another exchange that 

has been approved by the Commission 

that permit such exchange to allow 

trading of options on iShares® Silver 

Trust and United States Oil Fund at 

$0.50 strike price intervals where the 

strike price is less than $75.21 Therefore, 

the Commission designates the proposal 

operative upon filing.22

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 email to rulecomments@sec.gov. Please include File 

Number SR–NYSEArca–2012–14 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–NYSEArca–2012–14. This 

file number should be included on the 

subject line if email 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 

10:00 a.m. and 3:00 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– 

NYSEArca–2012–14 and should be 

submitted on or before March 5, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.23

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3260 Filed 2–10–12; 8:45 am] 

BILLING CODE 8011–01–P 


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