12414 Federal Register / Vol. 74, No. 55 / Tuesday, March 24, 2009 / Notices 

10See Securities Exchange Act Release No. 59587 

(March 17, 2009) (SR–ISE–2009–04, SR–CBOE– 

2009–001, SR–NYSEArca–2009–10, and SR– 

NYSEALTR–2009–11) (Order Granting Accelerated 

Approval of Proposed Rule Changes, as Amended, 

to Expand the $1 Strike Program). 

11For 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). 12 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 ISE filed Amendment Nos. 1 and 2 to its 

proposal on February 9, 2009 and February 10, 

2009, respectively. 

4CBOE filed Amendment No. 1 to its proposal on 

February 4, 2009. 

5See Securities Exchange Act Release Nos. 59377 

(February 10, 2009), 74 FR 7719 (SR–ISE–2009–04); 

59378 (February 10, 2009), 74 FR 7711 (SR–CBOE– 

2009–001); 59395 (February 11, 2009), 74 FR 7710 

(SR–NYSEArca–2009–10); and 59394 (February 11, 

2009), 74 FR 7722 (SR–NYSEALTR–2009–11). 

6See Letter to Secretary, Commission, from 

Thomas R. Keyes III, CPA, J.D., dated February 21, 

2009, regarding SR–CBOE–2009–001. 

operative delay of the Exchange’s 

proposal is consistent with the 

protection of investors and the public 

interest because such waiver will enable 

the Exchange to implement its proposed 

expansion of the Program 

contemporaneously with other 

exchanges,10 and respond to increased 

customer demand for $1 strikes without 

delay.11 Therefore, the Commission 

designates the proposal operative upon 

filing. The Commission expects that the 

Exchange will continue to monitor the 

trading volume associated with the 

additional options series listed as a 

result of this proposal and the effect of 

these additional series on market 

fragmentation and on the capacity of the 

Exchange’s, OPRA’s, and vendors’ 

automated systems. 

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission may summarily abrogate 

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. 

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 

No. SR–Phlx–2009–21 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–Phlx–2009–21. 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 inspection and copying 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 No. 

SR–Phlx–2009–21 and should be 

submitted on or before April 14, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–6330 Filed 3–23–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59587; File Nos. SR–ISE– 

2009–04, SR–CBOE–2009–001, SR– 

NYSEArca–2009–10, and SR–NYSEALTR– 

2009–11] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Chicago Board Options 

Exchange, Incorporated; NYSE Arca, 

Inc.; and NYSE Alternext US LLC; 

Order Granting Accelerated Approval 

of Proposed Rule Changes, as 

Amended, To Expand the $1 Strike 

Program 

March 17, 2009. 

I. Introduction 

Four options exchanges filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) proposed rule changes 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder 2 to 

expand the $1 Strike Program. 

Specifically, the International Securities 

Exchange, LLC (‘‘ISE’’) submitted its 

proposal on January 21, 2009; 3 the 

Chicago Board Options Exchange, 

Incorporated (‘‘CBOE’’) submitted its 

proposal on January 23, 2009; 4 NYSE 

Arca, Inc. (‘‘NYSE Arca’’) submitted its 

proposal on February 10, 2009; and 

NYSE Alternext US LLC (‘‘NYSE 

Alternext’’) submitted its proposal on 

February 10, 2009. The proposals 

submitted by ISE, CBOE, NYSE Arca, 

and NYSE Alternext (each an 

‘‘Exchange’’ and collectively, the 

‘‘Exchanges’’) are substantively 

identical. The proposals were published 

for comment in the Federal Register on 

February 19, 2009.5 The Commission 

received one comment in response to 

CBOE’s proposal.6 This order approves 

the proposed rule changes, as amended 

in the cases of ISE and CBOE, on an 

accelerated basis. 

II. Description of the Proposals 

The $1 Strike Program currently 

allows each Exchange to select a total of 

10 individual stocks on which option 

series may be listed at $1 strike price 

intervals. To be eligible for inclusion in 

the Program, an underlying stock must 

close below $50 in its primary market 

on the previous trading day. For each 

stock selected for the Program, each 

Exchange may list strike prices at $1 

intervals from $3 to $50, but no $1 strike 

price may be listed that is greater than 

$5 from the underlying stock’s closing 

price in its primary market on the 

previous day. Each Exchange also may 

list $1 strikes on any other option class 

designated by another securities 

exchange that employs a similar 

program under their respective rules. 

The Exchanges may not list long-term 

option series at $1 strike price intervals 

for any class selected for the program. 

Each Exchange is restricted from listing 

any series that would result in strike 

prices being $0.50 apart. 

Each Exchange has proposed to 

amend its rules to expand the $1 Strike 

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Federal Register / Vol. 74, No. 55 / Tuesday, March 24, 2009 / Notices 12415 

7CBOE also proposed to amend its $1 Strike 

Program by eliminating from Rule 24.9.11 the 

provision stating that if CBOE lists strike prices in 

$1 intervals in the Mini-SPX options class, the 

number of classes CBOE can select to participate in 

the $1 Strike Program is reduced by one. 

8See supra note 4. 

9 Id. 

10 Id. 

11 In approving these proposed rule changes, the 

Commission notes that it has considered the 

proposed rules’ impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

12 15 U.S.C. 78f(b)(5). 

13 15 U.S.C. 78s(b)(2). 

14See e-mails from Samir Patel, Assistant General 

Counsel, ISE; Patrick Sexton, Associate General 

Counsel, CBOE; and Andrew Stevens, Chief 

Counsel, U.S. Equities & Derivatives, NYSE 

Euronext, Inc. on behalf of NYSE Arca and NYSE 

Alternext; to Nathan Saunders, Special Counsel, 

and Heidi Pilpel, Special Counsel, Division of 

Trading and Markets, Commission, on March 16, 

2009. 

15See supra note 6. 

16 15 U.S.C. 78s(b)(5). 

Program to allow each Exchange to 

select a total of 55 individual stocks on 

which option series may be listed at $1 

strike price intervals, and to expand 

slightly the price range on which the 

Exchange may list $1 strikes, i.e., from 

$1 to $50. The existing restrictions on 

listing $1 strikes, as outlined above, will 

continue. The provision that each 

Exchange may also list $1 strikes on any 

other option class designated by another 

securities exchange that employs a 

similar program under their respective 

rules will remain unchanged.7

Each Exchange also has proposed to 

add a delisting policy. Specifically, each 

Exchange will, on a monthly basis, 

review series listed under the $1 Strike 

Program with a strike price more than 

$5 from the current value of the 

underlying security. Each Exchange will 

delist series with no open interest in 

both the put and the call series having 

a: (i) Strike higher than the highest 

strike price with open interest in the put 

and/or call series for a given expiration 

month; and (ii) strike lower than the 

lowest strike price with open interest in 

the put and/or call series for a given 

expiration month. 

Notwithstanding each proposed 

delisting policy, each Exchange will be 

permitted to grant member requests to 

add strikes and/or maintain strikes in 

series eligible for delisting. In addition, 

each proposed delisting policy provides 

that if the Exchange identifies series for 

delisting, it shall notify other options 

exchanges with similar delisting 

policies regarding eligible series for 

listing, and shall work with such other 

exchanges to develop a uniform list of 

series to be delisted, so as to ensure 

uniform series delisting of multiply 

listed options classes. 

Each Exchange represented in its 

filing that it and the Options Price 

Reporting Authority have the necessary 

systems capacity to handle the 

additional traffic associated with the 

listing and trading of an expanded 

number of options series as proposed by 

this filing. Each Exchange also 

represented that it believes its $1 Strike 

Program has provided investors with 

greater trading opportunities and 

flexibility and the ability to more 

closely tailor their investment strategies 

and decisions to the movement of the 

underlying security, and, further, that it 

has not detected any material 

proliferation of illiquid options series 

resulting from the narrower strike price 

intervals. Each Exchange also stated in 

its filing that current market conditions, 

in which the number of securities 

trading below $50 has increased 

dramatically, further warrant the 

expansion of the Program. 

The Commission received one 

comment letter in support of the 

proposed rule change.8 The commenter 

described himself as an individual retail 

non-professional investor and stated 

that ‘‘$1 strike price intervals provide 

investors with greater flexibility in the 

trading of equity options that overlie 

lower price stocks, by allowing 

investors to establish equity options 

positions that are better tailored to meet 

their investment objectives.’’ 9 The 

commenter added that the recent 

general decline in stock prices has 

resulted in several stocks being below 

$3, the lowest option strike price 

currently available in the $1 Strike 

Program, and stated that trading options 

at the $2 or $1 strike price levels would 

enable him to minimize losses and 

‘‘position [his] portfolio for enhanced 

future gains.’’ 10

III. Commission’s Findings and Order 

Granting Accelerated Approval of the 

Proposed Rule Changes 

After careful review, the Commission 

finds that the respective proposed rule 

changes are consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.11 In 

particular, the Commission finds that 

the respective proposed rule changes are 

consistent with Section 6(b)(5) of the 

Act 12 in that they are designed to 

promote just and equitable principles of 

trade, to prevent fraudulent and 

manipulative acts, and, in general, to 

protect investors and the public interest. 

The Commission notes that the 

Exchanges have represented that current 

market conditions have resulted in a 

dramatic increase in the number of 

securities trading below $50. The 

Commission believes that the proposed 

expansions to the $1 Strike Program 

should provide investors with added 

flexibility in the trading of equity 

options and further the public interest 

by allowing investors to establish equity 

options positions that are better tailored 

to meet their investment objectives, 

particularly given current market 

conditions. The Commission also 

believes that, with the addition of the 

delisting policy, the proposals strike a 

reasonable balance between the 

Exchanges’ desire to accommodate 

market participants by offering a wider 

array of investment opportunities and 

the need to avoid unnecessary 

proliferation of options series and the 

corresponding increase in quotes. 

In approving the respective proposed 

rule changes, the Commission has relied 

on each Exchange’s representation that 

it has the necessary systems capacity to 

support the new options series that will 

be listed under this proposal. Further, 

the Commission expects that each 

Exchange will continue to monitor the 

trading volume associated with the 

additional options series listed as a 

result of this proposal and the effect of 

these additional series on market 

fragmentation and on the capacity of 

such Exchange’s, OPRA’s, and vendors’ 

automated systems. 

In addition, the Commission finds 

good cause, pursuant to Section 19(b)(2) 

of the Act 13 for approving the proposals 

prior to the thirtieth day after the date 

of publication in the Federal Register. 

The Exchanges have represented that 

they continue to receive customer 

requests to expand the $1 Strike 

Program as soon as possible, and have 

requested accelerated approval so that 

each Exchange may respond to 

increased customer demand for $1 

strikes without delay.14 In their requests 

for acceleration, ISE and CBOE also 

represent that the $1 Strike Program has 

provided investors with greater trading 

opportunities and flexibility and the 

ability to more closely tailor their 

investment strategies and decisions to 

the movement of the underlying 

security. CBOE further states that such 

advantages will be particularly 

beneficial under current market 

conditions. In addition, the only 

comment letter received on the filings 

was supportive of the expansion.15

Accordingly, the Commission finds 

there is good cause, consistent with 

Section 6(b)(5) of the Act 16 to approve 

the Exchanges’ proposals on an 

accelerated basis. 

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12416 Federal Register / Vol. 74, No. 55 / Tuesday, March 24, 2009 / Notices 

17 15 U.S.C. 78s(b)(2). 

18 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). 

5A conversion (reversal) order is an order 

involving the purchase (sale) of a put option and 

the sale (purchase) of a call option in equivalent 

units with the same strike price and expiration in 

the same underlying security, and the purchase 

(sale) of the related instrument. See Rule 

6.53C(a)(9). 

6 15 U.S.C. 78s(b)(3)(A). 

7As a result of being eligible for COB, these 

complex orders will also be eligible for electronic 

auction via the complex order auction (‘‘COA’’), the 

automated improvement mechanism (‘‘AIM’’) and/ 

or the solicitation auction mechanism (‘‘AIM 

SAM’’). See Rules 6.53C.06, 6.74A.07 and 6.74B.01. 

8 In open outcry, stock-option orders that have 

only one option leg have priority over bid (offers) 

of the trading crowd, but not over bids (offers) in 

the public customer limit order book. See, e.g., 

Rules 6.45A(b)(ii) and 6.45B(b)(ii). 

9 In open outcry, stock-option orders that have 

more than one option leg are handled in the same 

manner as other complex orders that have more 

than one option leg and, as such, have priority over 

equivalent bids (offers) in the individual series legs 

that are represented in the trading crowd or in the 

public customer limit order book provided at least 

one leg of the order betters the corresponding bid 

(offer) in the public customer limit order book by 

at least the minimum trading increment or a $0.01 

increment, which increment shall be determined by 

the Exchange on a class-by-class basis. Id. 

10 15 U.S.C. 78f(b). 

11 15 U.S.C. 78f(b)(5). 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,17 that the 

proposed rule changes, as amended 

(SR–ISE–2009–04; SR–CBOE–2009–001; 

SR–NYSEArca–2009–10; and SR– 

NYSEALTR–2009–11) be, and they 

hereby are, approved on an accelerated 

basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–6327 Filed 3–23–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59585; File No. SR–CBOE– 

2009–017] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Related to the Complex 

Order Book 

March 17, 2009. 

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 March 13, 

2009, the Chicago Board Options 

Exchange, Incorporated (the ‘‘Exchange’’ 

or ‘‘CBOE’’) 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 Exchange filed the 

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 

The Exchange proposes to amend 

Rule 6.53C, Complex Orders on the 

Hybrid System, to permit conversions 

and reversals 5 to be eligible for routing 

to the complex order book (‘‘COB’’). The 

text of the proposed rule change is 

available on the Exchange’s Web site 

(http://www.cboe.org/Legal), at the 

Exchange’s Office of the Secretary and 

at the Commission. 

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 

When the Exchange originally 

adopted its electronic COB rule in 2005, 

the rule contained a provision related to 

the routing of conversions and reversals. 

Specifically, the rule provided that 

conversions and reversals will not be 

eligible for routing to the COB and that, 

when the Exchange determines to allow 

conversions and reversals to route to 

COB, it will submit to the Commission 

a rule filing pursuant to Section 

19(b)(3)(A) of the Act.6

The Exchange has enhanced its COB 

system functionality and has 

determined to permit conversions and 

reversals to be routed to COB. As such, 

as provided in the rule, this rule change 

is being submitted pursuant to Section 

19(b)(3)(A) to eliminate the restriction 

on routing conversions and reversals to 

COB. Conversions and reversals, as well 

as any other complex orders with stock 

that have more than one option leg, will 

be handled by COB in the same manner 

as stock-option orders that have only 

one option leg with one exception.7

For stock-option orders that have only 

one option leg, the rule currently 

provides that the option leg will not be 

executed on the Hybrid System at the 

Exchange’s best bid (offer) in that series 

if one or more public customer orders 

are resting at that price on the electronic 

book, unless the option leg trades with 

such public customer order(s). This 

COB provision is consistent with 

CBOE’s open outcry priority rules for 

stock-option orders that have only one 

option leg.8 For conversions, reversals 

and other complex orders with stock 

that have more than one option leg, the 

rule text will clarify that this provision 

will apply only if there are public 

customer orders resting on the Hybrid 

System at the Exchange’s best bid (offer) 

in the electronic book for each of the 

options legs of the conversion, reversal 

or stock-option order. Thus, the options 

legs of such an order would not execute 

on the Hybrid System at the Exchange’s 

best bid (offer) if one or more public 

customer orders are resting at that price 

in the electronic book in each of the 

options legs, unless the options legs 

trade with such public customer orders. 

This proposed COB provision is 

consistent with CBOE’s open outcry 

priority rules for stock-option orders 

that have more than one option leg.9

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with Section 

6(b) of the Act 10 in general and furthers 

the objectives of Section 6(b)(5) of the 

Act 11 in particular in that it is designed 

to foster cooperation and coordination 

with persons engaged in regulating, 

clearing, settling, processing 

information with respect to, and 

facilitating transactions in securities, 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. In particular, the 

Exchange believes that the addition of 

conversions and reversals to the list of 

complex orders eligible for electronic 

handling under Rule 6.53C is a 

significant enhancement for investors 

mstockstill on PROD1PC66 with NOTICES