Document ID: SEC-2010-0108-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by NYSE Amex LLC Amending Commentary .01 to Rule 903G
Posted Date: 2010-01-21T05:00Z

[Federal Register: January 21, 2010 (Volume 75, Number 13)]
[Notices]               
[Page 3506-3507]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21ja10-95]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61343; File No. SR-NYSEAmex-2009-94]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NYSE Amex LLC Amending 
Commentary .01 to Rule 903G

January 13, 2010.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on December 23, 2009, NYSE Amex LLC (``NYSE Amex'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 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 amend Commentary .01 to Rule 903G in order 
to extend until August 31, 2010, the current pilot period regarding the 
minimum value size for opening a FLEX Equity Option transaction 
(``Pilot Program''). The text of the proposed rule change is attached 
as Exhibit 5 to the 19b-4 form. A copy of this filing is available on 
the Exchange's Web site at http://www.nyse.com, at the Exchange'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 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Pilot Program provides for an initial series opening 
transaction size to be 150 contracts (or $1 million in underlying 
value, whichever is less).\4\ The Exchange believes that the proposed 
reduction of the minimum value size for opening a series provides FLEX 
participating members and their customers with greater flexibility in 
structuring the terms of FLEX Equity Options to better suit the FLEX 
traders' particular needs. Prior to the initiation of the Pilot 
Program, the minimum opening transaction value size in the case of FLEX 
Equity Options series was the lesser of (i) 250 contracts or (ii) the 
number of contracts overlying $1 million in the underlying series.\5\ 
The Pilot Program modifies the minimum opening size formula by reducing 
the ``250 contracts'' component to ``150 contracts'' (the $1 million 
underlying value component continues to apply unchanged).\6\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 58037 (June 26, 
2008), 73 FR 38008 (July 2, 2008).
    \5\ Under this formula, an opening transaction in a FLEX Equity 
series in a stock priced at $40 or more would reach the $1 million 
limit before it would reach the contract size limit, i.e., 250 
contracts times the multiplier (100) times the stock price ($40) 
equals $1 million in underlying value. For a FLEX Equity series in a 
stock priced at less than $40, the 250 contract size limit applies.
    \6\ Under this proposed formula, an opening transaction in a 
FLEX Equity series in a stock priced at approximately $66.67 or more 
would reach the $1 million limit before it would reach the contract 
size limit, i.e., 150 contracts times the multiplier (100) times the 
stock price ($66.67) equals just over $1 million in underlying 
value. For a FLEX Equity series in a stock priced at less than 
$66.67, the 150 contract size limit would apply.
---------------------------------------------------------------------------

    The Pilot Program expired on December 19, 2009. The purpose of this 
proposed rule change is to extend the pilot period that applies to the 
minimum value size for an opening Flex Equity Options transaction until 
August 31, 2010. This is merely an extension. The Exchange is not 
seeking any other changes to the Pilot Program.\7\
---------------------------------------------------------------------------

    \7\ The Commission notes that the Exchange has stated that it 
will provide the Commission with an updated report 45 days before 
any request to extend or make permanent the current pilot program 
regarding the minimum value size for opening a FLEX Equity Option 
transaction. See E-mail from Andrew Stevens, Chief Counsel, U.S. 
Equities and Derivatives, NYSE Amex, to Jennifer Colihan, Special 
Counsel, Division of Trading and Markets, Commission, dated January 
13, 2010.
---------------------------------------------------------------------------

    In support of the proposed rule change, the Exchange is submitting 
to the commission [sic] a Pilot Program report (the ``Report'') 
detailing the Exchange's experience with the Pilot Program. 
Specifically, the Report contains (i) data and analysis on the open 
interest and trading volume in FLEX Equity Options for which series 
were opened with a minimum opening size of 150 to 249 contracts with 
less than $1 million in underlying value; and (ii) analysis on the 
types of investors that initiated opening FLEX Equity Options 
transactions (i.e., institutional, high net worth or retail, if any). 
The Exchange is submitting the Report under separate cover and seeking 
confidential treatment under the Freedom of Information Act.
    The Exchange believes that maintaining the minimum opening 
transaction value size broadens the base of institutional investors 
that use FLEX Equity Options to manage their trading

[[Page 3507]]

and investment risk, including investors that currently trade in the 
over-the-counter market for customized options which can take on 
contract characteristics similar to FLEX Options but for which similar 
opening size restriction do not apply. The Exchange believes that 
market participants benefit from being able to trade these customized 
options in an exchange environment in several ways, including, but not 
limited to, enhanced efficiency in initiating and closing out 
positions; increased market transparency; and heightened contra-party 
creditworthiness due to the role of The Options Clearing Corporation as 
issuer and guarantor of FLEX Equity Options.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act \8\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act, in that it is designed to promote just and 
equitable principles of trade, remove impediments to and perfect the 
mechanisms of a free and open market and a national market system. 
Specifically, the Exchange believes that reducing the minimum value 
sizes for certain opening transactions in FLEX Equity Options series 
thereby providing FLEX participating members and their customers 
greater flexibility to trade FLEX Equity Options will benefit the 
marketplace and market participants.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
---------------------------------------------------------------------------

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 rule does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6)(iii) thereunder.\10\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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 the pre-filing requirement.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \11\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\12\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing.
---------------------------------------------------------------------------

    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
The Commission notes that the original pilot program was published for 
notice and comment and no comments were received.\13\ In addition, 
extending the pilot through August 31, 2010 does not raise any new or 
novel regulatory issues that were not previously considered in 
approving the original pilot. Based on the above, the Commission 
designates the proposal as operative upon filing.\14\
---------------------------------------------------------------------------

    \13\ See supra note 4.
    \14\ For purposes only of waiving the operative delay of this 
proposal, 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 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.

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-NYSEAmex-2009-94 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-NYSEAmex-2009-94. 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 Section, 100 F Street, 
NE., Washington, DC 20549-1090 on official business days between the 
hours of 10 a.m. and 3 p.m. Copies of the filing will also be available 
for inspection and copying at the NYSE's principal office and on its 
Internet Web site at http://www.nyse.com. 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-NYSEAmex-2009-94 and should be submitted 
on or before February 11, 2010.
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-1017 Filed 1-20-10; 8:45 am]
BILLING CODE 8011-01-P