Document ID: SEC-2012-1587-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT LLC
Posted Date: 2012-09-26T04:00Z

[Federal Register Volume 77, Number 187 (Wednesday, September 26, 2012)]
[Notices]
[Pages 59236-59238]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-23636]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67897; File No. SR-NYSEMKT-2012-42]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of 
Proposed Rule Change and 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 Any Series in the STOS That Do Not Have Open 
Interest and To Expand the Number of Series in STOS Under Limited 
Circumstances

 September 20, 2012.
    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 September 6, 2012, NYSE MKT LLC (the ``Exchange'' or 
``NYSE MKT'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. On September 18, 2012, the Exchange filed Amendment No. 
1. The Commission is

[[Page 59237]]

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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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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 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 any series in the STOS that do not have open interest and to 
expand the number of series in STOS under limited circumstances. The 
text of the proposed rule change is available on the Exchange's Web 
site at www.nyse.com, at the principal office of the Exchange, 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 purpose of the proposal is to amend Rule 903(h) to provide for 
the ability to open up to five consecutive expirations under the Short 
Term Option Series Program (``STOS Program'') for trading on the 
Exchange, to allow for the Exchange to delist any series in the STOS 
that do not have open interest and to expand the number of series in 
STOS under limited circumstances when there are no series at least 10% 
but not more than 30% away from the current price of the underlying 
security.\4\
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    \4\ On July 12, 2005, the Commission approved the Weeklies 
Program on a pilot basis. See Securities Exchange Act Release No. 
52014 (July 12, 2005), 70 FR 41244 (July 18, 2005) (Amex-2005-035). 
The Weeklies Program was made permanent on June 23, 2010. See 
Securities Exchange Act Release No. 62370 (June 23, 2010), 75 FR 
37870 (June 30, 2010) (SR-NYSEAmex-2010-62).
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    Currently, the Exchange may select up to 5 currently listed option 
classes on which STOS options may be opened in the STOS Program and the 
Exchange may also match any option classes that are selected by other 
securities exchanges that employ a similar program under their 
respective rules.\5\ 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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    \5\ See Securities Exchange Act Release Nos. 65805 (November 22, 
2011), 76 FR 73750 (SR-NYSEAmex-2011-89); 67194 (June 13, 2012), 77 
FR 36579 (June 19, 2012) (SR-NYSEMKT-2012-08).
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    This proposal seeks to allow the Exchange to open STOS option 
series for up to five consecutive week expirations. The Exchange 
intends to add a maximum of five consecutive week expirations under the 
STOS Program, however it will not add a STOS expiration in the same 
week that a monthly options series expires or, in the case of Quarterly 
Option Series, on an expiration that coincides with an expiration of 
Quarterly Option Series on the same class. In other words, the total 
number of consecutive expirations will be five, including any existing 
monthly or quarterly expirations.\6\ This change is being proposed 
notwithstanding the current cap of 30 series per class under the STOS 
Program.
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    \6\ For example, if quarterly options expire week 1 and monthly 
options expire week 3 from now, the proposal would allow the 
following expirations: week 1 quarterly, week 2 STOS, week 3 
monthly, week 4 STOS, and week 5 STOS. If quarterly options expire 
week 3 and monthly options expire week 5, the following expirations 
would be allowed: week 1 STOS, week 2 STOS, week 3 monthly, week 4 
STOS, and week 5 quarterly.
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    The Exchange notes that the STOS Program has been well-received by 
market participants, in particular by retail investors.\7\ The Exchange 
believes that the current proposed revision to the STOS Program will 
permit the Exchange to meet increased customer demand and provide 
market participants with the ability to hedge in a greater number of 
option classes and series.
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    \7\ Since the STOS Program [sic] been adopted, it has seen rapid 
acceptance among industry participants as evidenced by the expansion 
of the number of classes eligible for the STOS Program by various 
Exchanges. See Securities Exchange Act Release Nos. 65775 (November 
17, 2011), 76 FR 72473 (November 23, 2011) (SR-NASDAQ-2011-138); 
65776 (November 17, 2011), 76 FR 72482 (November 23, 2011) (SR-PHLX-
2011-131); 66563 (March 9, 2012), 77 FR 15426 (March 15, 2012); 
67194 (June 13, 2012), 77 FR 36597 (June 19, 2012) (SR-NYSEMKT-2012-
08); and 67178 (June 11, 2012), 77 FR 36305 (June 18, 2012) (SR-
NYSEArca-2012-60).
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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 have the necessary systems capacity 
to handle the potential additional traffic associated with trading of 
an expanded number of expirations that participate in the STOS Program.
    In addition, to provide for circumstances where the underlying 
security has moved such that there are no series that are at least 10% 
above or below the current price of the underlying security, the 
Exchange is proposing to add new language to Commentary .10 to provide 
that the Exchange would delist series with no open interest in both the 
call and the put series having a: (i) Strike higher than the highest 
price with open interest in the put and/or call series for a given 
expiration month; and (ii) strike lower than the lowest strike price 
with open interest in the put and/or the call series for a given 
expiration 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. Further, in the event that all existing series have open 
interest and there are no series at least 10% above or below the 
current price of the underlying security, the Exchange may list 
additional series, in excess of the 30 allowed currently under 
Commentary .10, that are at least 10% and not more than 30% above or 
below the current price of the underlying security.
    The Exchange believes that it is important to allow investors to 
roll existing option positions and ensuring that there are always 
series at least 10% but not more than 30% above or below the current 
price of the underlying security will allow investors the flexibility 
they need to roll existing positions.
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),\9\ in particular, 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 and, in general, to protect investors and the public interest.
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    \8\ 15 U.S.C. 78f (b).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that expanding the STOS Program will result 
in a continuing benefit to investors by giving them more flexibility to 
closely tailor their investment decisions and hedging decisions in a 
greater number of securities.
    The Exchange also believes that expanding the STOS Program will 
provide the investing public and other market participants with 
additional

[[Page 59238]]

opportunities to hedge their investment thus allowing these investors 
to better manage their risk exposure. While the expansion of the STOS 
Program will generate additional quote traffic, the Exchange does not 
believe that this increased traffic will become unmanageable since the 
proposal remains limited to a fixed number of expirations.
    The Exchange believes that the ability to delist series with no 
open interest in both the call and the put series will benefit 
investors by devoting the current cap in the number of series to those 
series that are more closely tailored to the investment decisions and 
hedging decisions of investors.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-NYSEMKT-2012-42 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-NYSEMKT-2012-42. 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, on business days 
between the hours of 10 a.m. and 3 p.m., located at 100 F Street NE., 
Washington, DC 20549-1090. 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 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-NYSEMKT-2012-42 and should be submitted on or before 
October 17, 2012.
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    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-23636 Filed 9-25-12; 8:45 am]
BILLING CODE 8011-01-P