Federal Register / Vol. 75, No. 206 / Tuesday, October 26, 2010 / Notices 65687 

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 that a self-regulatory 

organization submit to the Commission written 

notice of its 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 filing of the proposed rule change, or 

such shorter time as designated by the Commission. 

The Commission notes that the Exchange has 

satisfied this requirement. 

11 17 CFR 240.19b–4(f)(6)(iii). 

12See Securities Exchange Act Release No. 62321 

(June 17, 2010), 75 FR 36130 (June 24, 2010) (SR– 

NYSEArca–2010–46). 

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). 

14 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). 

regulatory organization has given the 

Commission written notice of its intent 

to file 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 proposed rule change 

has become effective pursuant to 

Section 19(b)(3)(A) of the Act 9 and Rule 

19b–4(f)(6) thereunder.10

A proposed rule change filed under 

Rule 19b–4(f)(6) normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b–4(f)(6)(iii),11 the 

Commission may designate a shorter 

time if such action is consistent with the 

protection of investors and the public 

interest. The Exchange has asked the 

Commission to waive the 30-day 

operative delay so that the proposal may 

become operative immediately upon 

filing. 

The Commission notes that the 

proposed rule change is substantially 

similar to a proposed rule change 

previously submitted by NYSE Arca 

which was published for notice and 

comment in the Federal Register.12 The 

Commission notes that it did not receive 

any comments on the NYSE Arca 

proposal, and does not believe the 

Exchange’s proposal raises any new or 

novel issues. Further, as noted above, 

because of the inadvertent assignment 

risk, market participants could not trade 

previously approved American style 

FLEX Options expiring on Expiration 

Friday. The proposal seeks to mitigate 

such assignment risks by limiting 

certain FLEX transactions to closing 

only, thereby allowing the trading of 

previously approved FLEX Options. For 

these reasons, the Commission believes 

that waiver of the 30-day operative 

delay is consistent with the protection 

of investors and the public interest and 

therefore, designates the proposed rule 

change operative upon filing.13

At any time within 60 days of the 

filing of such 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–Phlx–2010–141 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–2010–141. 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 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–2010– 

141 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. 2010–27066 Filed 10–25–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63138; File No. SR–CBOE– 

2010–092] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Expand the $.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 

12, 2010, 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 Rule 5.5 to: 

(i) Expand the $0.50 Strike Program for 

strike prices below $1.00; (ii) extend the 

$0.50 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 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. 


emcdonald on DSK2BSOYB1PROD with NOTICES
65688 Federal Register / Vol. 75, No. 206 / Tuesday, October 26, 2010 / Notices 

5See Rule 5.5.01(a)(2) referring to $1 Strike 

Program. 

6Using a Black Scholes pricing model. 

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

8 15 U.S.C. 78s(b)(1). 

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

10 15 U.S.C. 78f(b)(5). 

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 proposed rule 

change is to modify Interpretation and 

Policy .01 to Rule 5.5 to expand the 

$0.50 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 $0.50, 

beginning at $0.50 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 

which 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 $0.50 strike prices to 

options classes overlying no more than 

20 individual stocks as specifically 

designated by the Exchange. 

Currently, Rule 5.5.01(b) permits 

strike price intervals of $0.50 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 

which have national average daily 

volume that equals or exceeds 1,000 

contracts per day as determined by OCC 

during the preceding three calendar 

months. Further, the listing of $0.50 

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 $0.50 strike options 

traded on the Exchange has continued 

to increase since the inception of the 

Program. There are now approximately 

25 classes that participate in the $0.50 

Strike Program listed, and traded, across 

all options exchanges including CBOE; 

2 of which are classes chosen by CBOE 

for the $0.50 Strike Program. The 

current proposal would expand $0.50 

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 marketplace. 

By way of example, suppose an 

investor wanted to invest in 5,000 

shares of Sirius Satellite (‘‘SIRI’’) on July 

13, 2010. The closing price for SIRI on 

that day was $ 0.9678. If the investor 

wanted to buy a call option as an 

alternative to purchasing the shares 

outright for about $4,800, the lowest 

strike price available was the $1 strike, 

an out-of-the money option. However, if 

a $0.50 strike series had been available, 

the investor would have been able to 

control 5,000 shares by purchasing 50 

exercisable in-the-money $0.50 strike 

call options. The Exchange notes that a 

3-month SIRI call option with an 

implied volatility of 50 has a theoretical 

value of $0.47,6 or $47 per contract. 

Thus, the investor could have benefitted 

from the same upside potential as the 

stock purchase, but at a cost of only 

$2,350 ($47 per contract times 50 

contracts). 

Similarly, if an investor wanted to 

hedge a position in SIRI stock with put 

options, the lowest available strike price 

was the $1 strike, an in-the-money 

option. If a $0.50 strike series had been 

available, the investor could have used 

50 out-of-the-money puts for a fraction 

of the cost of buying 50 put options with 

a $1 strike price. The Exchange believes 

that investors deserve the opportunity to 

hedge downside risk in stocks trading 

less than $1.00 in the same manner as 

investors have with stocks trading 

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% outof-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 her return by gaining more 

premium, while also benefitting 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. 

By expanding the $0.50 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. The 

Exchange also proposes making a 

corresponding amendment to Rule 

5.5.01(a)(2) to add $5 and $6 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 $0.50 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 $0.50 Strike 

Program to a strike price of $5.50. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the Act 8

and the rules and regulations 

thereunder and, in particular, the 

requirements of Section 6(b) of the Act.9

Specifically, the Exchange believes the 

proposed rule change is consistent with 

the Section 6(b)(5) 10 requirements that 

the rules of an exchange be designed to 

promote just and equitable principles of 


emcdonald on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 206 / Tuesday, October 26, 2010 / Notices 65689 

11 15 U.S.C. 78s(b)(3)(A). 

12 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. 

13See Securities Exchange Act Release No. 63132 

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

approving expansion of $0.50 Strike Price Program). 

14For 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). 

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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. The Exchange believes 

that amending the current $0.50 Strike 

Program will 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 $0.50 Strike 

Program to allow a $0.50 strike interval 

below $1 for strike prices of $5.50 or 

less is necessary to provide investor 

additional opportunity to minimize and 

manage risk. 

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 11 and Rule 19b– 

4(f)(6) thereunder.12

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.13 Therefore, the 

Commission designates the proposal 

operative upon filing.14

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–2010–092 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–2010–092. 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–CBOE– 

2010–092 and should be submitted on 

or before November 16, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–27009 Filed 10–25–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63136; File No. SR– 

NYSEAmex–2010–98] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by NYSE 

Amex LLC 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 Amex LLC (‘‘NYSE 

Amex’’ 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 .06 to NYSE Amex Options 

Rule 903 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 


emcdonald on DSK2BSOYB1PROD with NOTICES