Document ID: SEC-2007-0960-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.
Posted Date: 2007-07-17T04:00Z

[Federal Register: July 17, 2007 (Volume 72, Number 136)]
[Notices]               
[Page 39112-39114]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17jy07-84]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56040; File No. SR-NYSEArca-2007-67]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Extend the 
Quarterly Options Series Pilot Program for a Two-Week Period

July 10, 2007.
    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 July 10, 2007, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been substantially prepared by the Exchange. The Exchange has 
designated this proposal as non-controversial under section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ 
which renders the proposed rule change effective upon filing with the 
Commission. 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\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to extend the Quarterly Options Series 
pilot program (``Pilot Program'') for an additional two-week period, 
through July 24, 2007, and to amend Rule 5.19(a) regarding the 
restriction on the number of strike prices for Quarterly Options Series 
based on an underlying index. The text of the proposed rule change is 
available on the Exchange's Web site (http://www.nysearca.com), at the 

Exchange's principal office, 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
    On July 12, 2006, the Exchange filed with the Commission a proposed 
rule change that allowed it to establish the Pilot Program, pursuant to 
which the Exchange lists and trades Quarterly Options Series.\5\ The 
rule change was effective upon filing. The Exchange hereby proposes to 
extend the Pilot Program for an additional two-week period, so that it 
will expire on July 24, 2007.\6\
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    \5\ See Securities Exchange Act Release No. 54166 (July 18, 
2006), 71 FR 42151 (July 25, 2006) (File No. SR-NYSEArca-2006-45) 
(``Pilot Program Release'').
    \6\ At the end of this proposed two-week extension, NYSE Arca 
will submit a subsequent proposal to the Commission, in conjunction 
with a report on the Pilot Program, requesting that the Pilot 
Program be extended until July 10, 2008.
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    In the Pilot Program Release, the Exchange stated that it would 
submit, in connection with any proposed extension of the Pilot Program, 
a Pilot Program Report (``Report'') that would provide an analysis of 
the Pilot Program covering the entire period which the program was in 
effect. The Report will include: (1) Data and written analysis on the 
open interest and trading volume in the classes for which Quarterly 
Options Series were opened; (2) an assessment of the appropriateness of 
the option classes selected for the Pilot Program; (3) an assessment of 
the impact of the Pilot Program on the capacity on the Exchange, OPRA, 
and market data vendors (to the extent data from market data vendors is 
available); (4) any capacity problems or other problems that arose 
during the operation of the Pilot Program and how the Exchange 
addressed such problems; (5) any complaints that the Exchange received 
during the operation of the Pilot Program and how the Exchange 
addressed them; and (6) any additional information that would assist 
the Commission in assessing the operation of the Pilot Program. The 
Exchange plans to submit the Report in connection with a proposal that 
will extend the Pilot Program until July 10, 2008. This proposal and 
Report will be filed with the Commission at the conclusion of the 
proposed two-week extension.
    The Exchange also proposes at this time to add a provision to Rule 
5.19(a) regarding the limitations on the number of strikes the Exchange 
may list for Quarterly Options Series based on an underlying index. 
These changes mirror provisions previously submitted by the Chicago 
Board Options Exchange (``CBOE'') and approved by the Commission.\7\ 
The Exchange proposes to: (1) Limit the number of strike prices that 
the Exchange may initially open for Quarterly Options Series to five 
strike prices above and five below the value of the underlying index; 
(2) clarify that the Exchange may open for trading additional Quarterly 
Options Series of the same class when the Exchange deems such action 
necessary to maintain an orderly market or meet customer demand, 
provided that the additional series priced above (below) the value of 
the underlying index do not cause there to be more than five strike 
process above (below) the value of the underlying index; and (3) 
clarify that the opening of any new Quarterly Options Series will not 
affect the previously opened series of the same class. These changes 
are based on CBOE Rule 24.9 and are shown in Exhibit 5 to the proposed 
rule change on Form 19b-4 filed with the Commission.
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    \7\ See Securities Exchange Act Release No. 54762 (November 16, 
2006), 71 FR 67663 (November 22, 2006) (File No. SR-CBOE-2006-93).

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[[Page 39113]]

    Finally, NYSE Arca represents that the Exchange has the necessary 
system capacity to support any additional series listed as part of the 
Pilot Program.
2. Statutory Basis
    The Exchange believes that the continuation of the Quarterly 
Options Series Pilot Program will stimulate customer interest in 
options by creating greater trading opportunities and flexibility in 
investment choices. The Exchange further believes that continuation of 
the Pilot Program will provide the ability to more closely tailor 
investment strategies and provide a valuable hedging tool for 
investors. For these reasons, the Exchange believes the proposed rule 
change is consistent with the Act and the rules and regulations 
thereunder and, in particular, the requirements of section 6(b) of the 
Act.\8\ Specifically, the Exchange believes the proposed rule change is 
consistent with of section 6(b)(5) of the Act,\9\ which requires that 
the rules of an exchange be designed to promote just and equitable 
principles of trade, to prevent fraudulent and manipulative acts, to 
remove impediments to and perfect the mechanism for a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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

    The Exchange has designated the proposed rule change as one that: 
(1) Does not significantly affect the protection of investors or the 
public interest; (2) does not impose any significant burden on 
competition; and (3) does not become operative for 30 days from the 
date of filing, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest. 
Therefore, the foregoing rule change has become effective pursuant to 
section 19(b)(3)(A) of the Act \10\ and subparagraph (f)(6) of Rule 
19b-4 thereunder.\11\ The Exchange has asked the Commission to waive 
the operative delay to permit the Pilot Program extension to become 
operative prior to the 30th day after filing.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ As required under Rule 19b-4(f)(6)(iii), the Exchange 
provided the Commission with written notice of its intent to file 
the proposed rule change at least five business before doing so.
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because it will allow the benefits of the Pilot Program to continue 
without interruption.\13\ Therefore, the Commission designates the 
proposal operative upon filing. The Commission, in deciding to waive 
the operative delay in order to allow the Pilot Program to continue 
uninterrupted for the proposed two-week extension, has relied on the 
Exchange's representation that it will submit the Report as required by 
the Pilot Program on or before the expiration of the extension period 
(i.e., July 24, 2007).\14\
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    \13\ For 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\ As set forth in the Exchange's original filing proposing 
the Pilot Program, if the Exchange were to propose an extension, an 
expansion, or permanent approval of the Pilot Program, the Exchange 
would submit, along with any filing proposing such amendments to the 
program, a report that would provide an analysis of the Pilot 
Program covering the entire period during which the Pilot Program 
was in effect. The report would include, at a minimum: (1) Data and 
written analysis on the open interest and trading volume in the 
classes for which Quarterly Options Series were opened; (2) an 
assessment of the appropriateness of the option classes selected for 
the Pilot Program; (3) an assessment of the impact of the Pilot 
Program on the capacity of the Exchange, OPRA, and market data 
vendors (to the extent data from market data vendors is available); 
(4) any capacity problems or other problems that arose during the 
operation of the Pilot Program and how the Exchange addressed such 
problems; (5) any complaints that the Exchange received during the 
operation of the Pilot Program and how the Exchange addressed them; 
and (6) any additional information that would assist in assessing 
the operation of the Pilot Program. The report must be submitted to 
the Commission at least sixty (60) days prior to the expiration date 
of the Pilot Program. See Form 19b-4 for File No. SR-PCX-2005-32, 
filed March 16, 2005.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate the 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: rule-comments@sec.gov. Please include 

File No. SR-NYSEArca-2007-67 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2007-67. 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 Commissions 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 Number SR-NYSEArca-2007-67 and should 
be submitted on or August 7, 2007.

[[Page 39114]]

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-13748 Filed 7-16-07; 8:45 am]

BILLING CODE 8010-01-P