Document ID: SEC-2008-0371-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2008-03-10T04:00Z

[Federal Register: March 10, 2008 (Volume 73, Number 47)]
[Notices]               
[Page 12786-12788]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10mr08-109]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57421; File No. SR-NYSEArca-2008-24]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change, as Modified by 
Amendment No. 1 Thereto, Amending Its Schedule of Fees and Charges 
Applicable to the Option Strategy Executions Pilot Program

March 3, 2008.
    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 February 26, 2008, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule

[[Page 12787]]

change as described in Items I, II, and III below, which Items have 
been substantially prepared by the Exchange. On February 29, 2008, the 
Exchange filed Amendment No. 1 to the proposal.\3\ NYSE Arca has 
designated this proposal as one establishing or changing a due, fee, or 
other charge imposed by the Exchange under Section 19(b)(3)(A),\4\ and 
Rule 19b-4(f)(2) thereunder,\5\ which renders the proposal effective 
upon filing with the Commission. The Commission is publishing this 
notice to solicit comments on the proposed rule change, as modified by 
Amendment No. 1, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 made clarifying changes to the original 
filing.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NYSE Arca proposes to amend its Schedule of Fees and Charges in 
order to extend the pilot program that applies to Option Strategy 
Executions (``Pilot Program'') until March 1, 2009. The text of the 
proposed rule change is available at the Exchange, the Commission's 
Public Reference Room, and http://www.nysearca.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, NYSE Arca 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. 
NYSE Arca 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 purpose of the proposed rule change is to extend the Pilot 
Program that applies to Option Strategy Executions until March 1, 
2009.\6\ The transactions included as part of the Pilot Program include 
reversals and conversions,\7\ dividend spreads,\8\ box spreads,\9\ 
short stock interest spreads,\10\ and merger spreads.\11\ 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 
$750 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 
$25,000 per initiating firm for all strategy executions. The Exchange 
believes that by keeping fees low, the Exchange is able to attract 
liquidity by accommodating these transactions. Extending the Pilot 
Program until March 1, 2009 will allow the Exchange to keep these fees 
low and thus continue to attract liquidity.
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    \6\ The current rule text is substantially similar to the 
original filing approved in 2007. See Securities Exchange Act 
Release No. 55414 (March 7, 2007), 72 FR 11418 (March 13, 2007) (SR-
NYSEArca-2007-25).
    \7\ 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.
    \8\ Dividend spreads are trades involving deep in the money 
options that exploit pricing differences arising around the time a 
stock goes ex-dividend.
    \9\ A Box spread 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.
    \10\ 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.
    \11\ 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.
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    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 proposed rule change is consistent 
with Section 6(b) of the Act,\12\ in general, and furthers the 
objectives of Section 6(b)(4),\13\ in particular, in that it is 
intended to provide for the equitable allocation of reasonable dues, 
fees, and other charges among its members and other persons using its 
facilities. The Exchange believes that, as proposed, the cap on 
transaction fees for Strategy Executions applies equally to each member 
(ETP holder) of the Exchange. The Exchange further believes that by 
keeping fees low with the proposed cap, the Exchange is able to attract 
liquidity by accommodating these transactions.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(4).
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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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \14\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\15\ because it establishes or changes a due, fee or other 
charge imposed by the Exchange. 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.\16\
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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \15\ 17 CFR 240.19b-4(f)(2).
    \16\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
Section 19(b)(3)(C) of the Act, the Commission considers the period 
to commence on February 29, 2008, the date on which NYSE Arca filed 
Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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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-2008-24 on the subject line.

[[Page 12788]]

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-2008-24. 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such 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 No. SR-NYSEArca-2008-24 and should be 
submitted on or before March 31, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-4556 Filed 3-7-08; 8:45 am]

BILLING CODE 8011-01-P