Federal Register / Vol. 75, No. 206 / Tuesday, October 26, 2010 / Notices 65683 

16 15 U.S.C. 78s(b)(2). 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Exchange Act Release No. 62799 (August 30, 

2010) 75 FR 54662 (September 8, 2010) (SR–Phlx– 

2010–118). 

4See Securities Exchange Act Release No. 61920, 

(April 15, 2010), 75 FR 21902 (April 22, 2010) (SR– 

NYSEArca–2010–29) (notice of filing and 

immediate effectiveness permitting the concurrent 

listing of $3.50 and $4 strikes for classes that 

participate in both the $0.50 Strike and $1 Strike 

Programs). 

5See Exchange Rule 6.4, Commentary .04(a), 

referring to the $1 Strike Program. 

6SIRI was trading at $ 0.9678 on July 13, 2010. 

accelerated approval to proposed Rule 

421(b), because it will conform the ISE 

rules to the requirements of Section 

6(b)(10) of the Act. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,16 that the 

proposed rule change (SR–ISE–2010–99) 

be, and it hereby is, approved on an 

accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–26993 Filed 10–25–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63137; File No. SR– 

NYSEArca–2010–92] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by NYSE 

Arca, Inc. To Expand the $0.50 Strike 

Price Program 

October 20, 2010. 

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 October 

18, 2010, NYSE Arca, Inc. (‘‘NYSE Arca’’ 

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 

Commentary .04 to NYSE Arca Options 

Rule 6.4 to expand the $.50 Strike Price 

Program as described below. The text of 

the proposed rule change is available at 

the Exchange, on the Commission’s Web 

site at http://www.sec.gov, at the 

Commission’s Public Reference Room, 

and http://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 Exchange proposes to adopt Rule 

provisions similar to those proposed for 

use by NASDAQ OMX PHLX (‘‘Phlx’’) 3

that will amend Commentary .04 to 

NYSE Arca Options Rule 6.4, Series of 

Options Open for Trading, specifically 

the Exchange’s $.50 Strike Price 

Program (the ‘‘$.50 Strike Program’’ or 

‘‘Program’’) 4 to: (i) Expand the $.50 

Strike Program for strike prices below 

$1.00; (ii) extend the $.50 strike program 

to strike prices that are $5.50 or less; 

(iii) extend the prices of the underlying 

security to at or below $5.00; and (iv) 

extend the number of options classes 

overlying 20 individual stocks. The 

purpose of this proposed rule change is 

to expand the $.50 Strike Program in 

order to provide investors with 

opportunities and strategies to minimize 

losses associated with owning a stock 

declining in price. 

The Exchange is proposing to 

establish strike price intervals of $.50, 

beginning at $.50 for certain options 

classes where the strike price is $5.50 or 

less and whose underlying security 

closed at or below $5.00 in its primary 

market on the previous trading day and 

that have national average daily volume 

that equals or exceeds 1,000 contracts 

per day as determined by The Options 

Clearing Corporation (‘‘OCC’’) during the 

preceding three calendar months. The 

Exchange also proposes to limit the 

listing of $.50 strike prices to options 

classes overlying no more than 20 

individual stocks as specifically 

designated by the Exchange. 

Currently, Exchange Rule 6.4 at 

Commentary .04 permits strike price 

intervals of $.50 or greater beginning at 

$1.00 where the strike price is $3.50 or 

less, but only for option classes whose 

underlying security closed at or below 

$3.00 in its primary market on the 

previous trading day and that have 

national average daily volume that 

equals or exceeds 1,000 contracts per 

day as determined by the OCC during 

the preceding three calendar months. 

Further, the listing of $.50 strike prices 

is limited to options classes overlying 

no more than 5 individual stocks as 

specifically designated by the Exchange. 

The Exchange is currently restricted 

from listing series with $1 intervals 

within $0.50 of an existing strike price 

in the same series, except that strike 

prices of $2, $3, and $4 shall be 

permitted within $0.50 of an existing 

strike price for classes also selected to 

participate in the $0.50 Strike Program.5

The number of $.50 strike options 

traded on the Exchange has continued 

to increase since the inception of the 

Program. There are now approximately 

18 of the $.50 strike price option classes 

listed and traded across all options 

exchanges including the Exchange, five 

of which are classes chosen by the 

Exchange for the $0.50 Strike Program. 

The proposal would expand $.50 strike 

offerings to market participants, such as 

traders and retail investors, and thereby 

enhance their ability to tailor investing 

and hedging strategies and 

opportunities in a volatile market place. 

By way of example, if an investor 

wants to invest in 5,000 shares of Sirius 

Satellite (‘‘SIRI’’) at $0.9678,6 the only 

choice the investor would have today 

would be to buy out-of-the-money calls, 

at the $1.00 strike, or to invest in the 

underlying stock with a total outlay of 

$.96 per share or $4,800. However, if a 

$.50 strike series were available, an 

investor may be able to invest in 5,000 

shares by purchasing an exercisable inthe-money $.50 strike call option. It is 

reasonable to assume that with SIRI 

trading at $.96, the $.50 strike call 

option would trade at an estimated price 

of $.46 to $.48 under normal 

circumstances. This would allow the 

investor to manage 5,000 shares with 

the same upside potential return for a 

cost of only $2,350 (assuming $.47 as a 

call price). 

Similarly, if an investor wanted to 

spend $4,800 for 5,000 shares of SIRI, a 

$.50 put option that would trade for 


emcdonald on DSK2BSOYB1PROD with NOTICES
65684 Federal Register / Vol. 75, No. 206 / Tuesday, October 26, 2010 / Notices 

7This was the price for C on July 14, 2010. 

8 15 U.S.C. 78f(b). 

9 15 U.S.C. 78f(b)(5). 

10 15 U.S.C. 78s(b)(3)(A). 

11 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. 

12See Securities Exchange Act Release No. 63132 

(October 19, 2010) (SR–Phlx–2010–118) (order 

approving expansion of $0.50 Strike Price Program). 

13For 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). 

$.01 to $.05 would provide protection 

against a declining stock price in the 

event that SIRI dropped below $.50 per 

share. In a down market, where high 

volume widely held shares drop below 

$1.00, investors deserve the opportunity 

to hedge downside risk in the same 

manner as investors have with stocks 

greater than $1.00. 

Increasing the threshold from $3.00 to 

$5.00 and expanding the number of 

$0.50 strikes available for stocks under 

$5.00 further aids investors by offering 

opportunities to manage risk and 

execute a variety of option strategies to 

improve returns. For example, today an 

investor can enhance their yield by 

selling an out-of-the-money call. Using 

an example of an investor who wants to 

hedge Citigroup (‘‘C’’) which is trading at 

$4.24,7 that investor would be able to 

choose the $4.50 strike, which is 6% 

out-of-the-money, or they would be able 

to choose the $5.00 strike, which is 

17.92% out-of-the-money, under this 

proposal. Today, this investor only has 

the latter choice. Beyond that, this 

investor today may choose the $6.00 

strike, which is 41% out-of-the-money, 

and offers significantly less premium. 

Pursuant to this proposal, if this 

investor had a choice to hedge with a 

$5.50 strike option, the investor would 

have the opportunity to sell the option 

at only 29% out-of-the-money and 

would improve their return by gaining 

more premium, while also benefiting 

from 29% of upside return in the 

underlying equity. 

By increasing the number of securities 

from 5 individual stocks to 20 

individual stocks would allow the 

Exchange to offer investors additional 

opportunities to use the $0.50 strike 

program. The Exchange notes that $0.50 

strikes have had no impact on capacity. 

Further, the Exchange has observed the 

popularity of $0.50 strikes. The open 

interest in the $2.50 August strike series 

for Synovus Financial Corp. (‘‘SNV’’), 

which closed at $2.71 on July 13, 2010, 

was 12,743 options; whereas open 

interest in the $2 and $3 August strike 

series was a combined 318 options. The 

open interest in the August $1.50 strike 

series for Ambac Financial Group, Inc. 

(‘‘ABK’’), which closed at $0.7490 on 

July 13, 2010, was 15,879 options 

compared to 8,174 options for the $2 

strike series. The August $2.50 strike 

series had open interest of 22,280 

options, also more than the traditional 

$2 strike series. 

By expanding the $.50 Strike Program, 

investors would be able to better 

enhance returns and manage risk by 

providing investors with significantly 

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, 

trading and risk management goals. 

The Exchange also proposes making a 

corresponding amendment to 

Commentary .04(a) of NYSE Arca 

Options Rule 6.4 to add $5 to $1 Strike 

Program language that addresses listing 

series with $1 intervals within $0.50 of 

an existing strike price in the same 

series. Currently, and to account for the 

overlap with the $.50 Strike Program, 

the following series are excluded from 

this prohibition: strike prices of $2, $3, 

and $4. The Exchange proposes to add 

$5 and $6 to that list to account for the 

proposal to expand the $.50 Strike 

Program to a strike price of $5.50. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Securities Exchange Act of 1934 8

(the ‘‘Act’’) in general, and furthers the 

objectives of Section 6(b)(5) of the Act 9

in particular, in that it is designed 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. The 

Exchange believes that amending the 

current $.50 Strike Program would 

result in a continuing benefit to 

investors by giving them more flexibility 

to closely tailor their investment 

decisions in a greater number of 

securities. Investors would be provided 

with an opportunity to minimize losses 

associated with declining stock prices 

which do not exist today. With the 

increase in active, low-prices securities, 

the Exchange believes that amending 

the $.50 Strike Program to allow a $.50 

strike interval below $1 for strike prices 

of $5.50 or less is necessary to provide 

investors with additional opportunity to 

minimize and manage risk. 

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 10 and Rule 19b– 

4(f)(6) thereunder.11

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.12 Therefore, the 

Commission designates the proposal 

operative upon filing.13

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: 


emcdonald on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 206 / Tuesday, October 26, 2010 / Notices 65685 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3FLEX Options are flexible exchange-traded 

index, equity, or currency option contracts that 

provide investors the ability to customize basic 

option features including size, expiration date, 

exercise style, and certain exercise prices. FLEX 

Options may have expiration dates within five 

years. See Phlx Rule 1079. FLEX currency option 

contracts traded on the Exchange are also known as 

FLEX World Currency Options (‘‘WCO’’) or FLEX 

Foreign Currency Options (‘‘FCO’’) contracts. 

4 17 CFR 240.19b–4(f)(6)(iii). 

5See Securities Exchange Act Release No. 60679 

(September 16, 2009), 74 FR 48619 (September 23, 

2009)(SR–Phlx–2009–81)(notice of filing and 

immediate effectiveness). 

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–NYSEArca–2010–92 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–2010–92. 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 

available publicly. All submissions 

should refer to File Number SR– 

NYSEArca–2010–92 and should be 

submitted on or before November 16, 

2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–27007 Filed 10–25–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63140; File No. SR–Phlx– 

2010–141] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Permit 

Certain FLEX Options To Trade Under 

the FLEX Trading Procedures for a 

Limited Time on a Closing Only Basis 

October 20, 2010. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on October 

7, 2010, NASDAQ OMX PHLX LLC 

(‘‘Phlx’’ or ‘‘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 the Substance 

of the Proposed Rule Change 

The Exchange is filing with the 

Commission a proposal to amend Phlx 

Rule 1079 (FLEX Index, Equity and 

Currency Options) to permit certain 

exchange-traded flexible options (‘‘FLEX 

Options’’) 3 to continue to trade under 

the FLEX trading procedures for a 

limited time on a closing only basis. 

The Exchange requests that the 

Commission waive the 30-day operative 

delay period contained in Exchange Act 

Rule 19b–4(f)(6)(iii).4

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http:// 

nasdaqomxphlx.cchwallstreet.com/ 

NASDAQOMXPHLX/Filings/, 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 

Exchange 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 

Exchange 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 

Phlx Rule 1079 to allow certain FLEX 

Options, which are identical in all terms 

to an underlying security or index 

option (‘‘Non-FLEX Option’’), to 

continue to trade on a closing only basis 

using the FLEX trading procedures for 

the balance of the trading day on which 

the Non-FLEX Option is added as an 

intra-day add. 

The Exchange recently adopted rule 

changes to allow FLEX Options to 

expire on or within two business days 

of a third-Friday-of-the-month 

expiration (‘‘Expiration FLEX 

Options’’).5 Such FLEX Options could 

have either an American or Europeanstyle exercise. Among other things, the 

rule change also provided that 

Expiration FLEX Options will be 

permitted before (but not after) NonFLEX Options with identical terms are 

listed. Once and if an option series is 

listed for trading as a Non-FLEX Option 

series, (i) all existing open positions 

established under the FLEX trading 

procedures shall be fully fungible with 

transactions in the respective Non-FLEX 

Option series, and (ii) any further 

trading in the series would be as NonFLEX Options subject to the Non-FLEX 

trading procedures and rules. 

The Options Clearing Corporation 

(‘‘OCC’’) became concerned that, in 

certain circumstances, in the event a 

Non-FLEX Option is listed with 

identical terms to an existing FLEX 

Option, OCC could not net the positions 

in the contracts until the next business 

day. If the Non-FLEX Option were listed 

intra-day, and an investor with a 

position in the FLEX Option attempted 


emcdonald on DSK2BSOYB1PROD with NOTICES