Document ID: SEC-2010-0737-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Amex LLC
Posted Date: 2010-05-19T04:00Z

[Federal Register: May 19, 2010 (Volume 75, Number 96)]
[Notices]               
[Page 28091-28093]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19my10-118]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62084; File No. SR-NYSEAmex-2010-40]

 
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change, as Modified by 
Amendment No. 1, To Adopt Rules Extending the Maximum Term of FLEX 
Index and FLEX Equity Options and To Establish a New Pilot Program

May 12, 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 April 22, 2010, NYSE Amex LLC (``NYSE Amex'' or the ``Exchange'') 
filed with the Securities and Exchange Commission (the ``Commission''), 
as modified by Amendment No. 1 on May 12, 2010, the proposed rule 
change as described in Items I and II below, which Items have been 
prepared by the self-regulatory organization.\3\ The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Commission notes that Amendment No. 1 replaces the 
original filing in its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing Amendment No. 1 to SR-NYSEAmex-2010-40 in 
order to revise the Statutory Basis section and to adopt rules 
extending the maximum term of FLEX Index and FLEX Equity Options, and 
to establish a new Pilot Program to permit FLEX Options to trade with 
no minimum size requirement, and also to correct a reference within the 
rule text. A copy of this filing is available on the Exchange's Web 
site at http://www.nyse.com, at the Exchange's principal office, at the 
Commission's Public Reference Room, and on the Commission's Web site at 
http://www.sec.gov.

[[Page 28092]]

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
    NYSE Amex is filing this Amendment No. 1 in order to revise the 
Statutory Basis section of the 19b-4 with corresponding changes to the 
Exhibit 1. The Exchange is not proposing any revisions to the Exhibit 
5. This amendment replaces the original filing in its entirety.
    The purpose of the filing is to modify Rule 903G to extend the 
maximum term of FLEX Index and FLEX Equity options to the same term 
permissible on NYSE Arca Inc. (``Arca''); and replace the minimum value 
size Pilot Program for FLEX Equity options with a new Pilot Program to 
eliminate minimum value sizes for both FLEX Equity options and FLEX 
Index options by adopting rule provisions similar to those in use by 
the Chicago Board Options Exchange (``CBOE''). The Exchange also 
proposes to correct a rule reference.
Extension of the Maximum Term Of FLEX Index and FLEX Equity Options
    The Exchange is proposing to adopt a provision to allow a maximum 
term of fifteen years for both FLEX Equity and FLEX Index options, 
based on a provision in NYSE Arca Rule 5.32(d)(1).\4\ This change will 
allow NYSE Amex to remain competitive and offer the same terms for FLEX 
options as other markets.
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    \4\ See Securities Exchange Act Release No. 34-59305 (January 
27, 2009) 74 FR 5954 (February 3, 2009).
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Minimum Value Size Requirements for All FLEX Options
    Presently, under an existing Pilot Program, the Exchange has 
reduced the minimum value size requirements for an opening FLEX Equity 
transaction to the lesser of 150 contracts or the number of contracts 
overlying $1 million in underlying securities. An opening FLEX Index 
transaction requires a minimum size of $10 million Underlying 
Equivalent Value in the case of Broad Stock Index Group FLEX Index 
Options and $5 million Underlying Equivalent Value in the case of Stock 
Index Industry Group FLEX Index Options. The Exchange proposes to 
replace the existing minimum size Pilot Program with a new pilot 
program that eliminates the minimum value size requirements for both 
FLEX Equity and FLEX Index options. If, in the future, the Exchange 
proposes an extension of the new minimum value size Pilot Program, or 
should the Exchange propose to make the new Program permanent, the 
Exchange will submit, along with any filing proposing such amendments 
to the Program, a Pilot Program report that would provide an analysis 
of the Pilot covering the period during which the Program was in 
effect. This minimum value size report would include: (i) data and 
analysis on the open interest and trading volume in (a) FLEX Equity 
Options with opening transaction with a minimum size of 0 to 249 
contracts and less than $1 million in underlying value; (b) FLEX Index 
Options with opening transaction with a minimum opening size of less 
than $10 million in underlying equivalent value; and (ii) analysis on 
the types of investors that initiated opening FLEX Equity and Index 
Options transactions (i.e., institutional, high net worth, or retail). 
The report would be submitted to the Commission at least two months 
prior to the expiration date of the Pilot Program and would be provided 
on a confidential basis.
    The Exchange notes that any positions established under this Pilot 
would not be impacted by the expiration of the Pilot. For example, a 
10-contract FLEX Equity Option opening position that overlies less than 
$1 million in the underlying security and expires in January 2015 could 
be established during the Pilot. If the Pilot Program were not 
extended, the position would continue to exist and any further trading 
in the series would be subject to the minimum value size requirements 
for continued trading in that series. The proposed minimum opening 
transaction size elimination is based on a similar pilot approved for 
use on CBOE.\5\
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    \5\ See Exchange Act Release No. 34-61439 (January 28, 2010) 75 
FR 5831 (February 4, 2010).
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Correction To A Rule Reference
    In preparing this filing the Exchange discovered an incorrect rule 
reference in Rule 903G(c)(2). The reference is to Rule 952 that has 
been eliminated and replaced with Rule 960NY; as such we are amending 
our rules to make this correction.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) \6\ of the Securities Exchange Act of 1934 (the ``Act''), 
in general, and furthers the objectives of Section 6(b)(5) \7\ in 
particular in that it is designed to promote just and equitable 
principles of 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 by eliminating a minimum size for 
FLEX transactions and also to allow a term of up to fifteen years for 
FLEX transactions. The Exchange believes that these proposed changes 
provide greater opportunities for investors to manage risk through the 
use of FLEX options.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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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: (1) 
Significantly affect the protection of investors or the public 
interest; (2) impose any significant burden on competition; and (3) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-
4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). When filing a proposed rule change 
pursuant to Rule 19b-4(f)(6) under the Act, an Exchange is required 
to give 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 date 
of filing of the proposed rule change, or such shorter time as 
designated by the Commission. The Exchange has met this requirement.

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[[Page 28093]]

    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\10\ 
However, Rule 19b-4(f)(6) \11\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. NYSE Amex has requested that the 
Commission waive the 30-day operative delay.
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    \10\ 17 CFR 240.19b-4(f)(6)(iii).
    \11\ Id.
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    The Commission believes that waiving the 30-day operative delay 
with respect to the proposed rule change to the maximum term of FLEX 
options is consistent with the protection of investors and the public 
interest. The Commission notes that this proposed rule change will make 
the Amex rule substantially similar to the corresponding provisions of 
the Arca and CBOE rules, and may provide investors with greater 
flexibility when conducting transactions in FLEX options.\12\
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    \12\ See NYSE Arca Equities Rule 5.32(d)(1); CBOE Rule 
24A.4(a)(4)(i).
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    The Commission has also considered NYSE Amex's request to waive the 
30-day operative delay with respect to the minimum size pilot. Because, 
however, the Commission does not believe, practically speaking, that a 
pilot should retroactively commence, the Commission is only waiving the 
operative delay as of the date of this notice for the reasons discussed 
below.
    The Commission believes that shortening the 30-day operative delay 
to allow the commencement of the pilot as of the date of this notice is 
consistent with the protection of investors and the public interest. 
The Commission notes that the proposed rule change is substantially 
similar to a pilot that was previously approved by the Commission and 
is currently in existence for CBOE.\13\ The Commission also notes that 
the corresponding CBOE pilot was subject to full notice and comment in 
the Federal Register, and that the Commission only received comments 
that supported that proposal.\14\ Moreover, waiving the operative date 
as of the date of this notice is consistent with approval of CBOE's 
pilot, which allowed implementation as of the date of the Commission's 
approval order. For these reasons, the Commission designates the 
portion of the proposal to establish a minimum size pilot to be 
operative upon the date of issuance of this notice.\15\
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    \13\ See CBOE Rule 24A.4 Interpretations and Policies .01(b); 
see also Securities Exchange Act Release No. 61439 (January 28, 
2010) 75 FR 5831 (February 4, 2010) (SR-CBOE-2009-087).
    \14\ See Securities Exchange Act Release No. 61439 (January 28, 
2010) 75 FR 5831 (February 4, 2010) (SR-CBOE-2009-087).
    \15\ For the purposes only of waiving the operative date of this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of Amendment No. 1, 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 the 
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 rule-comments@sec.gov. Please include 
File Number SR-NYSEAmex-2010-40 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-NYSEAmex-2010-40. 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-
NYSEAmex-2010-40 and should be submitted on or before June 9, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-11937 Filed 5-18-10; 8:45 am]
BILLING CODE 8010-01-P