Document ID: SEC-2011-1833-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2011-11-29T05:00Z

[Federal Register Volume 76, Number 229 (Tuesday, November 29, 2011)]
[Notices]
[Pages 73753-73755]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30635]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65806; File No. SR-NYSEArca-2011-88]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Increase From 20 
to 30 the Number of Short Term Options Series That May Be Opened for 
Each Option Class That Participates in the Exchange's Short Term Option 
Series Program

November 22, 2011.
    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 November 18, 2011, NYSE Arca, Inc. (the ``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

[[Page 73754]]

been prepared by the Exchange. The Exchange filed the proposal as a 
``non-controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ 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 proposes to amend Commentary .07 to NYSE Arca Options 
Rule 6.4 to increase the number of Short Term Options Series that may 
be opened for each option class that participates in the Exchange's 
Short Term Option Series Program (``Program'') from 20 series to 30 
series. The text of the proposed rule change is available at the 
Exchange, the Commission's Public Reference Room, http://www.nyse.com, 
and http://www.sec.gov.

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 amend Commentary .07 to NYSE Arca Options 
Rule 6.4 to increase the number of Short Term Options Series that may 
be opened for each option class that participates in the Program from 
20 series to 30 series.\5\
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    \5\ On July 12, 2005, the Commission approved the Program on a 
pilot basis. See Securities Exchange Act Release No. 52013 (July 12, 
2005), 70 FR 41471 (July 19, 2005) (SR-PCX-2005-32). The Program was 
expanded and made permanent on June 23, 2010. See Securities 
Exchange Act Release No. 62369 (June 23, 2010), 75 FR 37868 (June 
30, 2010) (SR-NYSEArca-2010-59).
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    The Program is codified in NYSE Arca Options Rule 6.4 and 
Commentary .07 thereto. This rule text provides that, after an option 
class has been approved for listing and trading on the Exchange, the 
Exchange may open for trading on any Thursday or Friday that is a 
business day (``Short Term Option Opening Date'') series of options on 
no more than five (5) classes \6\ that expire on the next Friday that 
is a business day (``Short Term Option Expiration Date'').\7\
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    \6\ In addition to the five-option class restriction, the 
Exchange also may list Short Term Option Series on any option 
classes that are selected by other securities exchanges that employ 
a similar program under their respective rules.
    \7\ If the Exchange is not open for business on the respective 
Thursday or Friday that is a business day, the Short Term Option 
Opening Date will be the first business day immediately prior to 
that respective Thursday or Friday. Similarly, if the Exchange is 
not open for business on the Friday of the following business week, 
the Short Term Option Expiration Date will be the first business day 
immediately prior to that Friday. Short Term Option Series are P.M.-
settled, except for Short Term Option Series on indexes, which are 
A.M.-settled. No Short Term Option Series may expire in the same 
week in which monthly or Quarterly Option Series on the same class 
expire.
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    The strike price of each Short Term Option Series will be fixed at 
a price per share, with approximately the same number of strike prices 
being opened above and below the value of the underlying security (or, 
in the case of index options, the calculated value of the index) at 
about the time that the Short Term Option Series are initially opened 
for trading on the Exchange (e.g., if seven series are initially 
opened, there will be at least three strike prices above and three 
strike prices below the value of the underlying security). Any strike 
prices listed by the Exchange must be within thirty percent (30%) above 
or below the closing price of the underlying security from the 
preceding day. The Exchange is not proposing any changes to these 
additional Program limitations.
    The principal reason for the proposed expansion is market demand 
for additional Short Term Option Series in classes included in the 
Program in which the maximum number of series (20) has already been 
reached. Specifically, the Exchange has observed increased demand for 
additional Short Term Option Series when market-moving events, such as 
corporate events and large price swings, have occurred during the 
lifespan of an affected class included in the Program.
    Currently, in order to be able to respond to market demand, the 
Exchange is forced to delist certain Short Term Option Series in order 
to make room for higher-demand Short Term Option Series.\8\ The 
Exchange finds this method to be problematic for two reasons. First, 
the Exchange has received requests to maintain certain Short Term 
Option Series that it intends to delist to make room for higher-demand 
Short Term Option Series. While market participants may often access 
other markets for the delisted Short Term Option Series, the Exchange 
would prefer to provide market participants with their preferred choice 
of markets on which to trade--NYSE Arca. Second, this method can lead 
to competitive disadvantages among exchanges. If one exchange is 
actively responding to market demand by delisting and adding series and 
another exchange is the last to delist the less desirable series with 
open interest, then that exchange is required to maintain those series 
and is potentially unable to list the in-demand Short Term Option 
Series (because to do so could result in more than 20 Short Term Option 
Series being listed on that exchange). As a result, the Exchange 
believes that the maximum number of Short Term Option Series per class 
of options that participates in the Program should be increased to 30 
so that exchanges can list the full panoply of Short Term Option Series 
that other exchanges list and that the market demands.
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    \8\ The Exchange delists Short Term Option Series with no open 
interest regardless of whether those series are open for trading on 
another exchange.
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    To effect this change, the Exchange is proposing to amend 
Commentary .07 to NYSE Arca Options Rule 6.4. Specifically, the 
Exchange is proposing to limit the initial number of Short Term Option 
Series that may be opened for trading to 20 series and to limit the 
number of additional Short Term Option Series that may be opened for 
trading to 10 series.\9\
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    \9\ Short Term Option Series must be added pursuant to the 
existing listing parameters set forth in Commentary .07 to NYSE Arca 
Options Rule 6.4. Initial Short Term Option Series must be within 
30% above or below the closing price of the underlying security on 
the preceding day. Any additional strike prices listed by the 
Exchange must be within 30% above or below the current price of the 
underlying security. The Exchange may also open additional strike 
prices of Short Term Option Series that are more than 30% above or 
below the current price of the underlying security provided that 
demonstrated customer interest exists for such series, as expressed 
by institutional, corporate or individual customers or their 
brokers. Market-Makers trading for their own account are not 
considered when determining customer interest.
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    With regard to the impact of this proposal on system capacity, the 
Exchange has analyzed its capacity and represents that it and the 
Options Price Reporting Authority (``OPRA'') have the necessary systems 
capacity to handle the potential additional traffic associated with 
trading of an expanded number of Short Term Option Series for classes 
that participate in the Program.
    The Exchange believes that the Program has provided investors with

[[Page 73755]]

greater trading opportunities and flexibility and the ability to more 
closely tailor their investment and risk management strategies and 
decisions. Therefore, the Exchange requests a modest expansion of the 
current Program. It is expected that other options exchanges that have 
adopted a similar program will submit similar proposals.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Securities Exchange Act of 1934 (the 
``Act''),\10\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\11\ in particular, because it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to remove impediments to and perfect 
the mechanisms of a free and open market and a national market system 
and, in general, to protect investors and the public interest. The 
Exchange believes that expanding the number of Short Term Option Series 
per option class eligible to participate in the Program will allow the 
investing public and other market participants to better manage their 
risk exposure, and would benefit investors by giving them more 
flexibility to closely tailor their investment decisions in a greater 
number of securities. While the expansion of the Program will generate 
additional quote traffic, the Exchange does not believe that this 
increased traffic will become unmanageable since the proposal is 
limited to a fixed number of series per class. Further, the Exchange 
does not believe that the proposal will result in a material 
proliferation of additional series because it is limited to a fixed 
number of series per class and the Exchange does not believe that the 
additional price points will result in fractured liquidity.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 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

    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 \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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.
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    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.\14\ 
Therefore, the Commission designates the proposal operative upon 
filing.\15\
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    \14\ See Securities Exchange Act Release No. 65772 (November 17, 
2011) (SR-CBOE-2011-086) (order approving expansion of Short Term 
Option Program).
    \15\ 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).
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    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 email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2011-88 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-2011-88. This 
file number should be included on the subject line if email 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-2011-88 and should 
be submitted on or before December 20, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-30635 Filed 11-28-11; 8:45 am]
BILLING CODE 8011-01-P