Document ID: SEC-2012-1865-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT LLC
Posted Date: 2012-11-15T05:00Z

[Federal Register Volume 77, Number 221 (Thursday, November 15, 2012)]
[Notices]
[Pages 68194-68195]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-27720]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68191; File No. SR-NYSEMKT-2012-42]

Self-Regulatory Organizations; NYSE MKT LLC; Order Granting 
Approval of Proposed Rule Change, as Modified by Amendment No. 1, 
Amending Rule 903(h) and Related Commentary .10 To Expand the Number of 
Expirations Available Under the Short Term Option Series Program 
(``STOS Program''), To Allow for the Exchange To Delist Series in the 
STOS Program That Do Not Have Open Interest, and To Expand the Number 
of Series in the STOS Program Under Limited Circumstances

November 8, 2012.

I. Introduction

    On September 6, 2012, NYSE MKT LLC (``NYSE MKT'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
amend Rule 903(h) and related Commentary .10 (``Commentary .10'') to 
make certain modifications to the Exchange's Short Term Option Series 
Program (``STOS Program''). The proposed rule change was published for 
comment in the Federal Register on September 26, 2012.\3\ The 
Commission received no comment letters on the proposal. This order 
approves the

[[Page 68195]]

proposed rule change, as modified by Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 67897 (September 20, 
2012), 77 FR 59236 (``Notice''). The Commission notes that on 
September 18, 2012, the Exchange submitted Amendment No. 1 to the 
proposed rule change to make certain amendments that, in part, 
clarified the circumstances in which the Exchange will delist series 
with no open interest.
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II. Description of the Proposal

    The Exchange proposes to amend Commentary .10 to (i) expand the 
number of expirations available under the STOS Program; (ii) allow the 
Exchange to delist, in certain circumstances, series in the STOS 
program that do not have open interest; and (iii) allow the Exchange to 
list, in certain circumstances, additional series in the STOS program.
    The proposed rule change allows the Exchange to open a maximum of 
five consecutive expirations under the STOS Program for trading on the 
Exchange. The Exchange notes that it will not add expirations in a STOS 
series if such expirations would coincide with an existing expiration 
of a monthly or quarterly series of an option in the same class of the 
STOS series.
    The proposed rule change also amends the circumstances in which the 
Exchange may delist or list series in the STOS Program. Specifically, 
the proposed rule change provides that the Exchange will delist series 
in the STOS Program with no open interest in both the call and the put 
series having a: (i) Strike price higher than the highest strike price 
with open interest in the put and/or call series for a given expiration 
month; and (ii) strike price lower than the lowest strike price with 
open interest in the put and/or call series for a given month, so as to 
list series that are at least 10% but not more than 30% above or below 
the current price of the underlying security. The Exchange would also 
be permitted, under the proposed rule change, to list additional series 
in excess of the 30 series otherwise allowed \4\ under Commentary .10 
that are between 10% and 30% above or below the price of the underlying 
security. The Exchange will only be allowed to delist or list series in 
accordance with the proposed rule change in the event that the 
underlying security has moved so that there are no series that are at 
least 10% above or below the current price of the underlying security.
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    \4\ Commentary .10(a) provides, in part, that for each option 
class eligible for participation in the STOS Program, the Exchange 
may open up to 30 Short Term Option Series for each expiration date 
in that class.
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    The Exchange asserts that the ability to list five consecutive 
expirations under the STOS Program is designed to meet increased 
customer demand and provide market participants with the ability to 
hedge in a greater number of option classes and series.\5\ The Exchange 
also claims that the proposed amendments regarding delisting or listing 
STOS series are designed to provide investors flexibility by ensuring 
that there are series within the band of at least 10% but not more than 
30% above or below the current price of the underlying security.\6\
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    \5\ See Notice, supra note 3 at 59237.
    \6\ See id.
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III. Discussion and Commission Findings

    After careful review of the proposed rule change, the Commission 
finds that the proposed rule change is consistent with the requirements 
of the Act and the rules and regulations thereunder applicable to a 
national securities exchange.\7\ Specifically, the Commission finds 
that the proposal is consistent with Section 6(b)(5) of the Act,\8\ 
which requires, among other things, that the rules of a national 
securities 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 of a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest. The Commission believes that the 
proposed change may provide the investing public and other market 
participants with greater flexibility to closely tailor their 
investment and hedging decisions in a greater number of series, thus 
allowing investors to better manage their risk exposure.
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    \7\ In approving this proposed rule change, the Commission 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
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    In approving this proposal, the Commission notes that the Exchange 
has represented that it and OPRA have the necessary systems capacity to 
handle the potential additional traffic associated with opening of up 
to five consecutive expirations under the STOS Program.\9\ The 
Commission expects the Exchange to monitor the trading volume 
associated with the additional options series listed as a result of 
this proposal and the effect of these additional series on market 
fragmentation and on the capacity of the Exchange's, OPRA's, and 
vendors' automated systems.
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    \9\ See Notice, supra note 3 at 59237.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change, as modified by Amendment No. 1, 
(SR-NYSEMKT-2012-42) be, and it hereby is, approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-27720 Filed 11-14-12; 8:45 am]
BILLING CODE 8011-01-P