Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices 24547 

5 15 U.S.C. 78s(b)(2)(B). 

6 15 U.S.C. 78q–1(b)(3)(F). 

7 15 U.S.C. 78q–1. 

8 15 U.S.C. 78s(b)(2). 

9 In approving the proposed rule change, the 

Commission considered the proposal’s impact on 

efficiency, competition and capital formation. 15 

U.S.C. 78c(f). 

10 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

III. Discussion 

Section 19(b)(2)(B) of the Act 5 directs 

the Commission to approve a proposed 

rule change of a self-regulatory 

organization if it finds that such 

proposed rule change is consistent with 

the requirements of the Act and the 

rules and regulations thereunder 

applicable to such organization. Section 

17A(b)(3)(F) of the Act 6 requires, among 

other things, that the rules of a clearing 

agency be designed to promote the 

prompt and accurate clearance and 

settlement of securities transactions 

and, to the extent applicable, derivative 

agreements, contracts, and transactions. 

The proposed rule change is intended 

to facilitate client-related clearing. 

Because the proposed rule change will 

expand the use of US Treasuries for the 

initial margin requirement for clientrelated positions cleared in a clearing 

participant’s customer account origin, it 

will help remove certain barriers to 

client-related clearing, thereby 

promoting the prompt and accurate 

clearance and settlement of derivative 

agreements, contracts, and transactions, 

and therefore is consistent with the 

requirements of Section 17A(b)(3)(F) of 

the Act. 

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposal is 

consistent with the requirements of the 

Act and in particular with the 

requirements of Section 17A of the Act 7

and the rules and regulations 

thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,8 that the 

proposed rule change (File No. SR–ICC– 

2012–01) be, and hereby is, approved.9

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9769 Filed 4–23–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66827; File No. SR–ISE– 

2012–26] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing of Proposed Rule 

Change To List and Trade Option 

Contracts Overlying 10 Shares of a 

Security 

April 18, 2012. 

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 April 9, 

2012, International Securities Exchange, 

LLC (the ‘‘Exchange’’ or the ‘‘ISE’’) 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 self-regulatory 

organization. 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 list and 

trade option contracts overlying 10 

shares of a security (‘‘Mini Options’’). 

The text of the proposed rule change is 

available on the Exchange’s Internet 

Web site at http://www.ise.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 

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 

Pursuant to ISE Rule 502, the 

Exchange currently lists and trades 

standardized options contracts on a 

number of equities and ExchangeTraded Fund Shares (‘‘ETFs’’), each 

with a unit of trading of 100 shares. The 

purpose of this proposed rule change is 

to expand investors’ choices by listing 

and trading option contracts on a select 

number of high-priced and actively 

traded securities, each with a unit of 

trading ten times lower than those of the 

regular sized option contracts, or 10 

shares. Specifically, the Exchange 

proposes to adopt Supplementary 

Material .12(a) to ISE Rule 504, which 

states that after an option class on a 

stock or Exchange-Traded Fund Share 

with a 100 share deliverable has been 

approved for listing and trading on the 

Exchange, series of option contracts 

with a 10 share deliverable on that stock 

or Exchange-Traded Fund Share may be 

listed for all expirations opened for 

trading on the Exchange. The Exchange 

further proposes that Mini Options may 

only be listed on stocks and ExchangeTraded Fund Shares that meet the 

following criteria, at the time of listing: 

(a) The industry average daily options 

volume over the previous three calendar 

months is at least 10,000 contracts, and 

(b) the price of the underlying security 

is at least $150. 

The Exchange notes that as a result of 

the proposed listing criteria, only a 

handful of securities, ones that have 

significant options liquidity, will be 

eligible to have Mini Options listed on 

them. Specifically, pursuant to the 

listing criteria established by the 

Exchange for Mini Options, the 

following securities currently qualify to 

have Mini Options listed: Apple, Inc., 

(AAPL), SPDR Gold Trust (GLD), 

Google, Inc. (GOOG), Amazon, Inc. 

(AMZN), International Business 

Machines (IBM), and Priceline.com, Inc. 

(PCLN). The Exchange believes that 

Mini Options will appeal to retail 

investors who may not currently be able 

to participate in the trading of options 

on such high priced securities. 

Except for the difference in the 

deliverable of shares, the proposed Mini 

Options would have the same terms and 

contract characteristics as regular sized 

equity and ETF options, including 

exercise style. All existing Exchange 

rules applicable to options on equities 

and ETFs would apply to Mini Options, 

except with respect to position and 

exercise limits and hedge exemptions to 

those position limits, which would be 

tailored for the smaller size. Pursuant to 

proposed amendments to Rule 412, 

position limits applicable to the regular 

sized option contract will also apply to 

the Mini Options on the same 

underlying security, with 10 Mini 

Option contracts counting as one regular 

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24548 Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices 

3 ISE Rule 414, Exercise Limits, refers to exercise 

limits that correspond to aggregate long positions as 

described in ISE Rule 412. The position limit 

established in a given option under ISE Rule 412 

is also the exercise limit for such option. Thus, 

although the proposed rule change would not 

amend the text of ISE Rule 414 itself, the proposed 

amendment to ISE Rule 412 would have a 

corresponding effect to the exercise limits 

established in ISE Rule 414. 

4 15 U.S.C. 78f. 

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

sized contract. Positions in both the 

regular sized option contract and Mini 

Options on the same security will be 

combined for purposes of calculating 

positions. Further, hedge exemptions 

will apply pursuant to ISE Rule 413(a), 

which the Exchange proposes to revise 

to provide that 10 (as opposed to 100) 

shares of the underlying security in the 

appropriate hedge for Mini Options and 

to make clear that the hedge exemptions 

apply to the position limits set forth in 

Rule 412(a) and any Supplementary 

Material thereto, as well as the position 

limits set forth in Rule 412(d).3

The Exchange believes that the 

proposal to list Mini Options will not 

lead to investor confusion. There are 

two important distinctions between 

Mini Options and regular options that 

are designed to ease the likelihood of 

any investor confusion. First, the 

premium multiplier for the proposed 

Mini Options will be 10, rather than 

100, to reflect the smaller unit of 

trading. To reflect this change, the 

Exchange proposes to add Rule 709(c) 

which notes that bids and offers for an 

option contract overlying 10 shares will 

be expressed in terms of dollars per 

1/10th part of the total value of the 

contract. Thus, an offer of ‘‘.50’’ shall 

represent an offer of $5.00 on an option 

contract having a unit of trading 

consisting of 10 shares. Second, the 

Exchange intends to designate Mini 

Options with different trading symbols 

than that designated for the regular 

sized contract. For example, while the 

trading symbol for regular option 

contracts for Apple, Inc. is AAPL, the 

Exchange proposes to adopt 7AAPL as 

the trading symbol for Mini Options on 

that same security. 

The Exchange proposes to add 

Supplementary Material .12(b) to reflect 

that strike prices for Mini Options shall 

be set at the same level as for regular 

options. For example, a call series strike 

price to deliver 10 shares of stock at 

$125 per share has a total deliverable 

value of $1250, and the strike price will 

be set at 125. Further, pursuant to 

proposed new Supplementary Material 

.12(c) to Rule 504, the Exchange 

proposes to not permit the listing of 

additional series of Mini Options if the 

underlying is trading at $90 or less to 

limit the number of strikes once the 

underlying is no longer a high priced 

security. The Exchange proposes a 

$90.01 minimum for continued 

qualification so that additional series of 

Mini Options that correspond to 

standard strikes may be added even 

though the underlying has fallen 

slightly below the initial qualification 

standard. In addition, the underlying 

security must be trading above $90 for 

five consecutive days before the listing 

of Mini Option contracts in a new 

expiration month. This restriction will 

allow the Exchange to list strikes in 

Mini Options without disruption when 

a new expiration month is added even 

if the underlying has had a minor 

decline in price. 

The same trading rules applicable to 

existing equity and ETF options will 

apply to Mini Options. The Exchange 

notes that by listing the same strike 

price for Mini Options as for regular 

options, the Exchange seeks to keep 

intact the long-standing relationship 

between the underlying security and an 

option strike price thus allowing 

investors to intuitively grasp the 

option’s value, i.e., option is in the 

money, at the money or out of the 

money. The Exchange believes that by 

not changing anything but the 

multiplier and the option symbol, as 

discussed above, retail investors will be 

able to grasp the distinction between 

regular size option contracts and Mini 

Options. The Exchange notes that The 

Options Clearing Corporation (‘‘OCC’’) 

Symbology is structured for contracts 

that have a deliverable of other than 100 

shares to be designated with a numeric 

added to the standard trading symbol. 

Further, the Exchange believes that the 

contract characteristics of Mini Options 

are consistent with the terms of the 

Options Disclosure Document. 

With regard to the impact of this 

proposal on system capacity, ISE has 

analyzed its capacity and represents that 

it and the Options Price Reporting 

Authority have the necessary systems 

capacity to handle the potential 

additional traffic associated with the 

listing and trading of Mini Options. The 

Exchange has further discussed the 

proposed listing and trading of Mini 

Options with the OCC, which has 

represented that it is able to 

accommodate the proposal. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the provisions of Section 6 of the 

Securities and Exchange Act of 1934 

(‘‘Exchange Act’’),4 in general, and with 

Section 6(b)(5) of the Exchange Act,5 in 

particular, in that the proposal 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 mechanism of a free and 

open market and a national market 

system and, in general, to protect 

investors and the public interest. 

Specifically, the Exchange believes that 

investors would benefit from the 

introduction and availability of Mini 

Options by making options on high 

priced securities more readily available 

and as an investing tool at more 

affordable prices, particularly for 

average retail investors, who otherwise 

may not be able to participate in trading 

options on high priced securities. As 

noted above, the proposed rule change 

intends to adopt a different trading 

symbol to distinguish Mini Options 

from regular option contracts and 

therefore, ease any investor confusion as 

to the product they are trading. 

Moreover, the proposed rule change is 

designed to protect investors and the 

public interest by providing investors 

with an enhanced tool to reduce risk in 

high priced securities. In particular, 

Mini Options will provide retail 

customers who invest in high priced 

issues in lots of less than 100 shares 

with a means of protecting their 

investments that is currently only 

available to those who have positions of 

100 shares or more. Further, the 

proposed rule change is limited to those 

securities that meet the Exchange’s 

proposed listing criteria to ensure that 

only those securities that have 

significant options liquidity and 

therefore, customer demand, are 

selected to have Mini Options listed on 

them. 

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 

Within 45 days of the date of 

publication of this notice in the Federal 

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Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices 24549 

6See Securities Exchange Act Release No. 66725 

(April 3, 2012), 77 FR 21120 (April 9, 2012) (SR– 

NYSEArca–2012–26). 

7For a description of the proposed contract 

methodology for the mini option product proposed 

by NYSE Arca, see id. 8 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 66159 

(January 13, 2012), 77 FR 3021 (January 20, 2012) 

(‘‘Notice’’). 

4See letter from David A. Donohoe, Jr., Donohoe 

Advisory Associates LLC, to Elizabeth M. Murphy, 

Secretary, Commission, dated February 10, 2012 

(‘‘Donohoe Letter’’). 

5See Securities Exchange Act Release No. 66499 

(March 1, 2012), 77 FR 13680 (March 7, 2012). 

6 In Amendment No. 1, Nasdaq modified the 

proposal by, among other things: (1) Changing the 

alternative minimum price requirement from a bid 

price to a closing price that must be maintained for 

at least five consecutive business days; (2) stating 

that in the event a security listed under the 

alternative standard reaches a $4 closing price, in 

determining whether the security qualifies for 

listing under the existing Nasdaq Capital Market 

listing requirement Nasdaq would review the 

security to ensure that it meets both the quantitative 

and qualitative listing standards and would require 

that the security maintain the closing price for five 

Continued 

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 

the 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. In 

particular, the Commission seeks 

comment on the following: 

1. NYSE Arca, Inc. recently proposed 

to allow the listing and trading of a 

‘‘mini’’ option product.6 The Exchange’s 

proposal would allow the listing and 

trading of Mini Options contracts with 

contract specifications that differ from 

the similar product proposed by NYSE 

Arca. Due to the differences in contract 

specifications, these two similar 

products, even if on the same 

underlying security, would not 

necessarily be fungible. The 

Commission requests comment on 

whether the listing and trading of two 

distinct and non-fungible ‘‘mini’’ 

options products, particularly if on the 

same underlying security, would create 

investor confusion or raise any other 

issues or concerns for market 

participants. 

2. As discussed above, the Exchange’s 

proposal would provide for contract 

specifications for Mini Options that 

include: (i) The strike prices would be 

set at the same level for Mini Options 

as for corresponding standard contracts; 

(ii) the premium multiplier would be 10 

for Mini Options (rather than 100 as for 

the standard contract) and the premium 

would be expressed in terms of dollars 

per 1/10th part of the total value of the 

contract; and (iii) the Exchange would 

designate Mini Options with different 

trading symbols than the standard 

contract. The Commission requests 

comment regarding the Exchange’s 

proposed contract methodology.7

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 

No. SR–ISE–2012–26 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

Station Place, 100 F Street NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–ISE–2012–26. 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 

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 

available publicly. All submissions 

should refer to File Number SR–ISE– 

2012–26 and should be submitted on or 

before May 15, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–9771 Filed 4–23–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66830; File No. SR– 

NASDAQ–2012–002] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing of Amendment No. 1 and Order 

Granting Accelerated Approval to 

Proposed Rule Change, as Modified by 

Amendment No. 1, To Adopt an 

Alternative to the $4 Per Share Initial 

Listing Bid Price Requirement for the 

Nasdaq Capital Market of Either $2 

Closing Price Per Share or $3 Closing 

Price Per Share, if Certain Other 

Listing Requirements are Met 

April 18, 2012. 

I. Introduction 

On January 3, 2012, The NASDAQ 

Stock Market LLC (‘‘Exchange’’ or 

‘‘Nasdaq’’) 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 

proposal to adopt an alternative to the 

$4 minimum bid price initial listing 

requirement for the Nasdaq Capital 

Market of either $2 or $3, if certain other 

listing requirements are met. The 

proposed rule change was published for 

comment in the Federal Register on 

January 20, 2012.3 The Commission 

received one comment on the proposal.4

On March 1, 2012, the Commission 

extended to April 19, 2012 the time 

period in which to approve the 

proposed rule change, disapprove the 

proposed rule change, or institute 

proceedings to determine whether the 

proposed rule change should be 

disapproved.5 Nasdaq filed Amendment 

No. 1 to the proposed rule change on 

April 16, 2012.6 The Commission is 

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