Document ID: SEC-2010-1625-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2010-10-25T04:00Z

[Federal Register: October 25, 2010 (Volume 75, Number 205)]
[Notices]               
[Page 65545-65546]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25oc10-141]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63133; File No. SR-NYSEArca-2010-93]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NYSE Arca, Inc. To Establish a 
Pilot Program To List Series With Additional Expiration Months for Each 
Class of Options Opened for Trading on the Exchange

October 19, 2010.
    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 October 18, 2010, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
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.
---------------------------------------------------------------------------

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

    The Exchange proposes to adopt Commentary .09 to NYSE Arca Options 
Rule 6.4 to establish a Pilot Program to list additional expiration 
months for each class of options opened for trading on the Exchange. 
The text of the proposed rule change is available at the Exchange, on 
the Commission's Web site at http://www.sec.gov, at the Commission's 
Public Reference Room, and http://www.nyse.com.

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
    The Exchange proposes to adopt a Pilot Program to list additional 
expiration months for each class of options opened for trading on the 
Exchange, similar to a Pilot Program recently approved for use by the 
International Securities Exchange, Inc. (``ISE''),\3\ by adding 
proposed Commentary .09 to NYSE Arca Options Rule 6.4, Series of 
Options Open for Trading.
---------------------------------------------------------------------------

    \3\ See Exchange Act Release No. 63104 (October 14, 2010) 
approving SR-ISE-2010-91.
---------------------------------------------------------------------------

    Pursuant to NYSE Arca Rule 6.4(a), the Exchange currently opens 
four expiration months for each class of options open for trading on 
the Exchange, the first two being the two nearest months, regardless of 
the quarterly cycle on which that class trades; the third and fourth 
being the next two months of the quarterly cycle previously designated 
for that specific class. For example, if the Exchange listed in late 
May a new equity option on a January-April-July-October quarterly 
cycle, the Exchange would list the two nearest term months (June and 
July) and the next two months of the cycle (October and January). When 
the June series expires, the Exchange would add the August series as 
the next nearest month. And when the July series expires, the Exchange 
would add the September series.
    The Exchange believes that there is market demand for a greater 
number of expiration months. The Exchange therefore proposes to adopt a 
Pilot Program pursuant to which it will list up to an additional two 
expiration months, for a total of six expiration months for each class 
of options open for trading on the Exchange. The proposal will become 
effective on a pilot basis for a period of twelve months to commence on 
the next full month after approval is received to establish the pilot 
program. Under the proposal, the additional months listed pursuant to 
the pilot program will result in four consecutive expiration months 
plus two months from the quarterly cycle. For example, for option 
classes in the January cycle that have expiration months of June, July, 
October, and January, the Exchange would additionally list the August 
and September series. For options classes in the February quarterly 
cycle that have expiration months of October, November, February, and 
May, the Exchange would additionally list the December and January 
series. Under the proposal, no additional LEAP Series will be created.
    The Exchange seeks to limit the proposed rule change to 20 actively 
traded options classes. By limiting the pilot to a small number of 
classes, the Exchange will be able to gauge interest in the pilot while 
limiting any additional demands on system resources. It has been 
estimated that this pilot could add up to six or seven percent to 
current quote traffic, although changes in market maker quoting 
behavior may reduce that increase by up to half. The Exchange believes 
that a limited pilot is a prudent step to determine actual market 
demand for additional expiration months.
    If the Exchange were to propose an extension or an expansion of the 
pilot program, or should the Exchange propose to make the pilot program 
permanent, NYSE Arca will submit, along with any filing proposing such 
amendments to the pilot program, a pilot program report (``Report'') 
that will provide an analysis of the Pilot Program covering the first 
nine months of the pilot program and shall submit the Report to the 
Commission at least sixty (60) days prior to the expiration date of the 
pilot program. The Report will include, at a minimum: (1) Data and 
written analysis on the open interest and trading volume in the classes 
for which additional expiration months were opened; (2) an assessment 
of the appropriateness of the options classes selected for the pilot 
program; (3) an assessment of the impact of the pilot program on the 
capacity on NYSE Arca, OPRA, and on 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 NYSE Arca addressed such problems; (5) any complaints that NYSE 
Arca received during the operation of the pilot program and how NYSE 
Arca addressed them; and (6) any additional information that would 
assist the Commission in assessing the operation of the Pilot Program.
    Finally, the Exchange represents that it has the necessary systems 
capacity to support new options series that will result from the 
introduction of additional expiration months listed pursuant to this 
proposed rule change.

[[Page 65546]]

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 \4\ (the ``Act'') in 
general, and furthers the objectives of Section 6(b)(5) of the Act \5\ 
in particular, in that it is designed 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. In particular, the 
Exchange believes listing additional near-term expiration months will 
offer investors more variety in trading options series that were 
previously not available. The Exchange believes this proposal will also 
generate additional volume in these options classes without 
significantly taxing system resources.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not become operative for 30 days from the date on which it was filed, 
or such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \6\ and Rule 19b-
4(f)(6) thereunder.\7\
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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 satisfied this requirement.
---------------------------------------------------------------------------

    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiver of the operative 
delay is consistent with the protection of investors and the public 
interest because the proposal is substantially similar to that of 
another exchange that has been approved by the Commission.\8\ 
Therefore, the Commission designates the proposal operative upon 
filing.\9\
---------------------------------------------------------------------------

    \8\ See supra note 3.
    \9\ 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).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend 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.

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-2010-93 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-NYSEArca-2010-93. 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-
NYSEArca-2010-93 and should be submitted on or before November 15, 
2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-26926 Filed 10-22-10; 8:45 am]
BILLING CODE 8011-01-P