Document ID: SEC-2008-1181-0001
Agency: sec
Document Type: Notice
Title: Joint Industry Plan
Posted Date: 2008-08-26T04:00Z

[Federal Register: August 26, 2008 (Volume 73, Number 166)]
[
Notices]               
[Page 50375-50376]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26au08-99]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58385; File No. 4-443]

 
Joint Industry Plan; Notice of Filing and Order Approving on a 

Temporary Basis Amendment No. 2 to the Plan for the Purpose of 

Developing and Implementing Procedures Designed to Facilitate the 

Listing and Trading of Standardized Options

August 19, 2008.

I. Introduction

    On August 12, 2008, August 18, 2008, August 15, 2008, August 13, 

2008, August 8, 2008, August 14, 2008, August 14, 2008, and August 18, 

2008, the American Stock Exchange LLC (``Amex''), the Boston Stock 

Exchange, Inc. (``BSE''), Chicago Board Options Exchange, Incorporated 

(``CBOE''), the International Securities Exchange, LLC (``ISE''), The 

NASDAQ Stock Market LLC (``Nasdaq''), NYSE Arca Inc. (``NYSE Arca''), 

the Philadelphia Stock Exchange, Inc. (``Phlx''), and the Options 

Clearing Corporation (``OCC''), respectively, filed with the Securities 

and Exchange Commission (``Commission''), pursuant to section 11A of 

the Securities Exchange Act \1\ of 1934 (``Act'') and Rule 608 

thereunder,\2\ Amendment No. 2 to the Plan for the Purpose of 

Developing and Implementing Procedures Designed to Facilitate the 

Listing and Trading of Standardized Options (``the Options Listing 

Procedures Plan'' or ``OLPP'').\3\ The amendment would provide a 

uniform minimum volume threshold per underlying class to qualify for 

the introduction of a new expiration year of Long-term Equity 

AnticiPation Securities (``LEAPS'' or ``LEAP'') options. This order 

summarily puts into effect Amendment No. 2 on a temporary basis not to 

exceed 120 days and solicits comment on Amendment No. 2 from interested 

persons.\4\

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    \1\ 15 U.S.C. 78k-1.

    \2\ 17 CFR 242.608.

    \3\ On July 6, 2001, the Commission approved the OLPP, which was 

originally proposed by the Amex, CBOE, ISE, OCC, Phlx, and Pacific 

Exchange, Inc. (k/n/a NYSE Arca). See Securities Exchange Act 

Release No. 44521, 66 FR 36809 (July 13, 2001). On February 5, 2004, 

BSE was added as a sponsor to the OLPP. See Securities Exchange Act 

Release No. 49199, 69 FR 7030 (February 12, 2004). On March 21, 

2008, Nasdaq was added as a sponsor to the OLPP. See Securities 

Exchange Act Release No. 57546 (March 21, 2008), 73 FR 16393 (March 

27, 2008).

    \4\ A proposed amendment may be put into effect summarily upon 

publication of notice of such amendment, on a temporary basis not to 

exceed 120 days, if the Commission finds that such action is 

necessary or appropriate in the public interest, for the protection 

of investors or the maintenance of fair and orderly markets, to 

remove impediments to, and perfect the mechanism of, a national 

market system or otherwise in furtherance of the purposes of the 

Act. See 17 CFR 242.608(b)(4).

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II. Description of the Proposed Amendment

    Amendment No. 2 proposes to apply a uniform minimum volume 

threshold per underlying class to qualify for the introduction of a new 

expiration year of LEAP options. Currently, Participant Exchanges may 

list a new LEAP expiration year at the appropriate time without any 

consideration as to the activity level of the class of options.

    By agreeing to a minimum volume threshold per underlying class to 

qualify for an additional year of LEAP series, the Participant 

Exchanges intend to mitigate the number of option series available for 

trading. It is intended that this will in turn mitigate quote traffic, 

because Participants will not be submitting quotes in the not-listed 

series. The Plan Sponsors have agreed on a minimum volume threshold of 

1,000 contracts national average daily volume in the preceding three 

calendar months (excluding volume in LEAP and FLEX series) to qualify 

for the introduction of a new LEAP expiration year.

    In 2007, if this proposal had been in effect, the industry would 

have not added a new expiration year in 550 underlying securities, 

which would have reduced the overall number of listed series (LEAP and 

non-LEAP series) by 8%. These LEAP series generated only .43% of 

industry trading volume in a typical (non-expiration) sample week. The 

Exchanges agree that the benefit from reduced quoting levels greatly 

exceeds the small cost in missed business.

    The Amendment does not restrict the introduction of a new LEAP 

expiration year in Index options, or in classes that have had options 

products trading at any exchange for less than six months. It also does 

not restrict, for a particular options class, the introduction of new 

LEAP series with an expiration year that has already been introduced by 

at least one Exchange.

    The Commission directed the then-current options exchanges to act 

jointly to develop strategies to address overall capacity concerns in 

an Order dated September 8, 1999, as confirmed in a letter from the 

Director of the Division of Market Regulation dated September 13, 2000. 

This Amendment is an additional strategy to meet this goal.

III. Discussion

    After careful consideration, the Commission finds that the proposed 

amendment to the OLPP is consistent with the requirements of the Act 

and the rules and regulations thereunder.\5\ In particular, the 

Commission finds that the proposed amendment is consistent with the 

provisions of Section 11A of the Act \6\ and Rule 608 of Regulation NMS 

thereunder,\7\ in that it is appropriate in the public interest, for 

the protection of investors and the maintenance of fair and orderly 

markets. Specifically, the Commission believes that adopting a uniform 

minimum volume threshold per underlying class to qualify for the 

introduction of a new expiration year of LEAP options will reduce the 

number of option series available for trading, and thus may reduce 

increases in the options quote rate because market participants will 

not be submitting quotes in those series. In addition, the Commission 

finds that it is appropriate to put Amendment No.

[[Page 50376]]

2 into effect summarily upon publication of this notice on a temporary 

basis. The Commission believes that such action is appropriate in the 

public interest, for the protection of investors, and the maintenance 

of fair and orderly markets because it will allow the options exchanges 

to implement the initiative to reduce quote message traffic beginning 

immediately.

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    \5\ In approving this amendment, the Commission has considered 

its impact on efficiency, competition, and capital formation. See 

U.S.C. 78c(f).

    \6\ 15 U.S.C. 78k-1.

    \7\ 17 CFR 242.608(b)(4).

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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 

arguments concerning the foregoing, including whether proposed 

Amendment No. 2 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 4-443 in the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 

and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number 4-443. 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 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 Exchanges. 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 4-443 and should be submitted on or before 

September 16, 2008.

V. Conclusion

    It is therefore ordered, pursuant to Section 11A of the Act,\8\ and 

Rule 608 thereunder \9\ that proposed Amendment No. 2 be, and it hereby 

is, approved on a temporary basis until December 17, 2008.

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    \8\ 15 U.S.C. 78k-1.

    \9\ 17 CFR 242.608(b)(4).

    For the Commission, by the Division of Trading and Markets, 

pursuant to delegated authority.\10\

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    \10\ 17 CFR 200.30-3(a)(29).

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Florence E. Harmon,

Acting Secretary.

[FR Doc. E8-19782 Filed 8-25-08; 8:45 am]

BILLING CODE 8010-01-P