Document ID: SEC-2006-1193-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.
Posted Date: 2006-09-15T04:00Z

[Federal Register: September 15, 2006 (Volume 71, Number 179)]
[Notices]               
[Page 54547-54548]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15se06-92]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54417; File No. SR-NYSEArca-2006-52]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change Relating to 
Exchange Fees and Charges

September 8, 2006.
    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 August 31, 2006, the 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. The Exchange has designated 
the proposed rule change as one establishing or changing a due, fee, or 
other charge, pursuant to Section 19(b)(3)(A)(ii) of the Act \3\ and 
Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal effective 
upon filing with the Commission. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Schedule of Fees and Charges in 
order to extend the pilot program (``Pilot Program'') that applies to 
Option Strategy Executions until March 1, 2007. The Exchange also 
proposes at this time to correct a minor typographical error on the 
schedule. The text of the proposed rule change is available on NYSE 
Arca's Web site at (http://www.nysearca.com), at the Office of the 

Secretary at NYSE Arca, 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 proposal. 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
    The Exchange represents that the purpose of this proposed rule 
change is to extend the Pilot Program that applies to Option Strategy 
Executions until March 1, 2007. The transactions included as part of 
the Pilot Program include reversals and conversions,\5\ dividend 
spreads,\6\ box spreads,\7\ short stock interest spreads,\8\ and merger 
spreads.\9\ Because the referenced Options Strategy Transactions are 
generally executed by professionals whose profit margins are generally 
narrow, the Pilot Program caps the transaction fees associated with 
such executions at $1,000 per strategy execution that are executed on 
the same trading day in the same option class. In addition, there is 
also a monthly cap of $50,000 per initiating firm for all strategy 
executions. The Exchange believes that by keeping fees low, the

[[Page 54548]]

Exchange will be able to attract liquidity by accommodating these 
transactions. Extending the Pilot Program until March 1, 2007 will 
allow the Exchange to keep these fees low and thus continue to attract 
liquidity.
---------------------------------------------------------------------------

    \5\ Reversals and conversions are transactions that employ 
calls, puts and the underlying stock to lock in a nearly risk free 
profit. Reversals are established by combining a short stock 
position with a short put and a long call position that shares the 
same strike and expiration. Conversions employ long positions in the 
underlying stock that accompany long puts and short calls sharing 
the same strike and expiration.
    \6\ Dividend spreads are trades involving deep in the money 
options that exploit pricing differences arising around the time a 
stock goes ex-dividend.
    \7\ Box spreads is a strategy that synthesizes long and short 
stock positions to create a profit. Specifically, a long call and 
short put at one strike is combined with a short call and long put 
at a different strike to create synthetic long and synthetic short 
stock positions, respectively.
    \8\ A short stock interest spread is a spread that uses two deep 
in the money put options of the same class followed by the exercise 
of the resulting long position in order to establish a short stock 
interest arbitrage position.
    \9\ A merger spread is a transaction executed pursuant to a 
strategy involving the simultaneous purchase and sale of options of 
the same class and expiration date, but with different strike prices 
followed by the exercise of the resulting long option position.
---------------------------------------------------------------------------

    OTP Holders and OTP Firms who wish to benefit from the fee cap will 
be required to submit to the Exchange forms with supporting 
documentation (e.g., clearing firm transaction data) to qualify for the 
cap.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act,\10\ in general, and Section 6(b)(4),\11\ in 
particular, in that it provides for the equitable allocation of dues, 
fees, and other charges among its members.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

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

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \12\ and subparagraph (f)(2) of Rule 19b-4 
thereunder \13\ because it establishes or changes a due, fee, or other 
charge. At any time within 60 days of the filing of the proposed rule 
change, 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 furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-NYSEArca-2006-52 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-2006-52. 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. Copies of such 
filing also will be available for inspection and copying at the 
principal office of NYSE Arca. 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-2006-52 and should be submitted on or before 
October 6, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
 [FR Doc. E6-15299 Filed 9-14-06; 8:45 am]

BILLING CODE 8010-01-P