Document ID: SEC-2007-1574-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.
Posted Date: 2007-11-23T05:00Z

[Federal Register: November 23, 2007 (Volume 72, Number 225)]
[Notices]               
[Page 65798-65800]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23no07-117]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56797; File No. SR-NYSEArca-2007-106]

 
Self-Regulatory Organizations; NYSEArca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of a Proposed Rule Change, as 
Modified by Amendment No. 1, To List and Trade Options Already Listed 
on Another National Securities Exchange

November 15, 2007.
    Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on October 9, 2007, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the Exchange. On 
November 6, 2007, the Exchange filed Amendment No. 1 to the proposed 
rule change.\4\ This order provides notice of the proposal, as amended, 
and approves the proposal, as amended, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ In Amendment No. 1, the Exchange corrected typographical 
errors in the rule text and the purpose section where NYSE Arca Rule 
5.4 was incorrectly referenced as NYSE Arca Rule 5.6.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NYSE Arca proposes to revise the options original listing 
guidelines so that as long as the continued listing standards set forth 
in NYSE Arca Rule 5.4 are met and the option is listed and traded on 
another national securities exchange, the Exchange would be able to 
list and trade the option. The text of the proposed rule change is 
available at on NYSE Arca's Web site (http://www.nyse.com), at NYSE'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 III below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of

[[Page 65799]]

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 purpose of this proposed rule change is to revise the options 
original listing guidelines so that as long as the options maintenance 
listing standards set forth in NYSE Arca Rule 5.4 are met and the 
option is listed and traded on another national securities exchange, 
NYSE Arca would be able to list and trade the option. NYSE Arca Rule 
5.3(a)-(c) sets forth the guidelines that an underlying individual 
equity security must meet before the Exchange may initially list 
options on that security. These guidelines or requirements are uniform 
among the options exchanges.
    NYSE Arca Rule 5.3(a)(4) relates to the minimum market price at 
which an underlying security must trade for an option to be listed on 
it. NYSE Arca Rule 5.3(a)(4) permits the listing of individual equity 
options on both ``covered'' and ``uncovered'' underlying securities.\5\ 
In the case of an underlying security that is a ``covered security'' as 
defined under section 18(b)(1)(A) of the Securities Act of 1933 (``1933 
Act''), the closing market price of the underlying security must be at 
least $3 per share for the five (5) previous consecutive business days 
prior to the date on which the Exchange submits an option class 
certification to The Options Clearing Corporation (``OCC''). In 
connection with underlying securities deemed to be ``uncovered,'' 
Exchange rules require that such underlying security be at least $7.50 
for the majority of business days during the three (3) calendar months 
preceding the date of selection for such listing. In addition, an 
alternative listing procedure for ``uncovered'' securities also permits 
the listing of such options so long as: (1) The underlying security 
meets the guidelines for continued listing contained in NYSE Arca Rule 
5.4; \6\ (2) options on such underlying security are traded on at least 
one other registered national securities exchange; and (3) the average 
daily trading volume (``ADTV'') for such options over the last three 
calendar months preceding the date of selection has been at least 5,000 
contracts. Paragraphs (1) through (3) of NYSE Arca Rule 5.3(a) further 
set forth minimum requirements for an underlying security such as 
shares outstanding, number of holders and trading volume.
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    \5\ Section 18(b)(1)(A) of the 1933 Act provides that, ``[a] 
security is a covered security if such security is-listed, or 
authorized for listing, on the New York Stock Exchange or the 
American Stock Exchange, or listed, or authorized for listing, on 
the National Market System of the Nasdaq Stock Market (or any 
successor to such entities) * * * '' See 15 U.S.C. 77r(b)(1)(A).
    \6\ The rule text of NYSE Arca Rule 5.3 refers to NYSE Arca Rule 
5.6 instead of NYSE Arca Rule 5.4, which contains NYSE Arca's 
continued listing standards.
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    The Exchange submits that the alternative listing procedure has 
limited usefulness. The options exchange (or exchanges) that may be 
fortunate enough to list an option that at first met the original 
listing standards but subsequently fails to do so, is provided a 
trading monopoly inconsistent with the multiple trading of options, 
fostering competition and the maintenance of a national market system. 
Under this proposal, an option may be multiply-listed and traded as 
long as one other options exchange is trading the particular option and 
such underlying security of the option meets existing continued listing 
guidelines or requirements.
    The Exchange notes that the requirements for listing additional 
series of an existing listed option (i.e., continued listing 
guidelines) are less stringent, largely because, in total, the 
Exchange's guidelines assure that options will be listed and traded on 
securities of companies that are financially sound and subject to 
adequate minimum standards.
    NYSE Arca believes that although the continued listing requirements 
are uniform among the options exchanges, the application of both the 
original and continued listing standards in the current market 
environment has had an anti-competitive effect.
    Specifically, the Exchange notes that on several occasions it has 
been unable to list and trade options classes that trade elsewhere 
because the underlying security of such option did not at that time 
meet original listing standards. However, the other options exchange(s) 
may continue to trade such options (and list additional series) based 
on the lower maintenance listing standards, while NYSE Arca may not 
list any options on such underlying security. The Exchange believes 
that this is anti-competitive and inconsistent with the aims and goals 
of a national market system in options.
    To address this situation, the Exchange proposes to add new 
paragraph (6) to NYSE Arca Rule 5.3(a) and amend the alternative 
original listing requirement set forth in paragraph (4)(b) of NYSE Arca 
Rule 5.3(a). Specifically, paragraph (6) would be added to provide that 
notwithstanding that a particular underlying security may not meet the 
requirements set forth in Paragraphs 1 through 4 of NYSE Arca Rule 
5.3(a), the Exchange nonetheless could list and trade an option on such 
underlying security if (i) the underlying security meets the guidelines 
for continued listing in NYSE Arca Rule 5.4 and (ii) options on such 
underlying security are listed and traded on at least one other 
registered national securities exchange. Paragraph (4)(b) of NYSE Arca 
Rule 5.3(a) would be amended to delete the reference to the alternative 
original listing guideline for ``uncovered'' securities. In connection 
with the proposed changes, the Exchange represents that the procedures 
currently employed to determine whether a particular underlying 
security meets the initial listing criteria will similarly be applied 
to the continued listing criteria.
    The Exchange believes that this proposal is narrowly tailored to 
address the circumstances where an options class is currently 
ineligible for listing on NYSE Arca while at the same time, such option 
is trading on another options exchange(s). The Exchange notes that when 
an underlying security meets the maintenance listing guidelines and at 
least one other exchange lists and trades options on the underlying 
security, the option is available to the investing public. Therefore, 
the Exchange does not believe that the current proposal will introduce 
any inappropriate additional listed options classes. The Exchange 
submits that the adoption of the proposal is essential for competitive 
purposes and to promote a free and open market for the benefit of 
investors.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\7\ in general, and furthers the 
objectives of section 6(b)(5) \8\ in particular in that it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, and to remove impediments to and perfect the mechanism of a 
free and open market and a national market system.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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.

[[Page 65800]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. 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-NYSEArca-2007-106 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-2007-106. 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 Number SR-NYSEArca-2007-106 and should 
be submitted on or before December 14, 2007.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
regulations thereunder applicable to a national securities exchange.\9\ 
In particular, the Commission finds that the proposed rule change is 
consistent with section 6(b)(5) of the Act,\10\ which requires that the 
rules of an exchange be designed to prevent fraudulent and manipulative 
acts and practices, 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 proposal is narrowly tailored to 
address the circumstances where an equity option class is currently 
ineligible for initial listing on the Exchange even though it meets the 
Exchange's continued listing standards and is trading on another 
options exchange. Allowing NYSE Arca to list and trade options on such 
underlying securities should help promote competition among the 
exchanges that list and trade options. The Commission notes, and the 
Exchange represents, that the procedures that the Exchange currently 
employs to determine whether a particular underlying security meets the 
initial equity option listing criteria for the Exchange will similarly 
be applied when determining whether an underlying security meets the 
Exchange's continued listing criteria.
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    \9\ In approving this rule change, the Commission notes that it 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(5).
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    The Commission finds good cause, pursuant to section 19(b)(2)(B) of 
the Act,\11\ for approving the proposed rule change prior to the 30th 
day after the publication of the notice of the filing thereof in the 
Federal Register. The Commission notes that the proposed rule change is 
substantially identical to the proposed rule change submitted by 
American Stock Exchange LLC,\12\ which was previously approved by the 
Commission after an opportunity for notice and comment, and therefore 
does not raise any new regulatory issues.
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    \11\ 15 U.S.C. 78s(b)(2)(B).
    \12\ See Securities Exchange Act Release No. 56598 (October 2, 
2007), 72 FR 57615 (October 10, 2007) (SR-Amex-2007-48). See also 
Securities Exchange Act Release Nos. 56647 (October 11, 2007), 72 FR 
58702 (October 16, 2007) (SR-ISE-2007-80) (substantially identical 
proposed rule change approved on an accelerated basis); 56717 
(October 29, 2007), 72 FR 62508 (November 5, 2007) (SR-Phlx-2007-73) 
(substantially identical proposed rule change approved on an 
accelerated basis); and 56774 (November 8, 2007) (SR-CBOE-2007-114) 
(substantially identical proposed rule change approved on an 
accelerated basis).
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\13\ that the proposed rule change (SR-NYSEArca-2007-106), as 
amended, be, and it hereby is, approved on an accelerated basis.
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    \13\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-22781 Filed 11-21-07; 8:45 am]

BILLING CODE 8011-01-P