Document ID: SEC-2011-1645-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2011-10-25T04:00Z

[Federal Register: October 25, 2011 (Volume 76, Number 206)]
[Notices]               
[Page 66107-66109]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25oc11-114]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65591; File No. SR-NYSEArca-2011-73]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Retire a Pilot 
Program and Harmonize the Exchange's Rules Regarding Listing 
Expirations With the Existing Rules of Other Exchanges

October 19, 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 October 13, 2011, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') 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 Exchange. 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.
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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 NYSE Arca Options Rule 6.4 (Series 
of Options Open for Trading) and Commentary .09 thereto to retire a 
pilot program and harmonize the Exchange's rules regarding listing 
expirations with the existing rules of other exchanges. The text of the 
proposed rule change is available at the Exchange, at http://
www.nyse.com, at the Commission's Public Reference Room, and at the 
Commission's Web site at 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

[[Page 66108]]

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 proposed rule change is to retire the Additional 
Expiration Months Pilot Program (``Pilot Program'') and to amend the 
Exchange's rules regarding listing expirations. This filing is based on 
the existing rules of the NASDAQ Options Market (``NOM'') \3\ and 
NASDAQ OMX PHLX LLC (``PHLX'').\4\
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    \3\ See NOM Chapter IV, Section 6 (Series of Options Contracts 
Open for Trading). See also Securities Exchange Act Release No. 
57478 (March 12, 2008), 73 FR 14521 (March 18, 2008) (SR-NASDAQ-
2007-004 and SR-NASDAQ-2007-080).
    \4\ See PHLX Rule 1012 (Series of Options Open for Trading). See 
also Securities Exchange Act Release No. 63700 (January 11, 2011), 
76 FR 2931 (January 18, 2011) (SR-Phlx-2011-04). The PHLX filing was 
based on NOM's existing rules.
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NYSE Arca Options Rules Governing Listing of Expirations

    Pursuant to NYSE Arca Rule 6.4, the Exchange typically opens four 
expiration months for each class of options open for trading on the 
Exchange: the first two being the two nearest months, regardless of the 
quarterly cycle on which that class trades, and the third and fourth 
being the next two months of the quarterly cycle previously designated 
by the Exchange for that specific class. For competitive reasons, in 
2010 the Exchange established the Pilot Program pursuant to which it 
could list up to an additional two expiration months, for a total of 
six expiration months for each class of options open for trading on the 
Exchange.\5\ The filing to establish the Pilot Program was 
substantially similar in all material respects to a proposal of the 
International Securities Exchange, LLC (``ISE'').\6\
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    \5\ See Securities Exchange Act Release No. 63133 (October 19, 
2010), 75 FR 65545 (October 25, 2010) (SR-NYSEArca-2010-93).
    \6\ See Securities Exchange Act Release No. 63104 (October 14, 
2010), 75 FR 64773 (October 20, 2010) (SR-ISE-2010-91).
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    After NYSE Arca and ISE established their respective Pilot 
Programs, ISE submitted a filing in response to a PHLX filing regarding 
the listing of expirations.\7\ In the PHLX filing, PHLX amended its 
rules that so that it could open ``at least one expiration month'' for 
each class of standard options open for trading on PHLX.\8\ PHLX stated 
in its filing that this amendment was ``based directly on the recently 
approved rules of another options exchange, namely Chapter IV, Sections 
6 and 8 of NOM.'' \9\ Since PHLX's rules did not hard code an upper 
limit on the maximum number of expirations that could be listed per 
class, ISE believed that PHLX (and NOM) had the ability to list 
expirations that ISE would not be able to then list under its rules. As 
a result, ISE amended its rules by adding new Supplementary Material 
.10 to ISE Rule 504 and Supplementary Material .04 to ISE Rule 2009 to 
permit ISE to list additional expiration months on options classes 
opened for trading on ISE if such expiration months are opened for 
trading on at least one other national securities exchange.\10\
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    \7\ See Securities Exchange Act Release No. 64343 (April 26, 
2011), 76 FR 24546 (May 2, 2011) (SR-ISE-2011-26). See also supra 
note 4.
    \8\ See supra note 4 at 2932.
    \9\ Id.
    \10\ See supra note 7 at 24547.
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    Because the Exchange had adopted a Pilot Program similar to ISE's, 
the Exchange adopted new Commentary .12 to Rule 6.4 that permits the 
Exchange to list additional expiration months on options classes opened 
for trading on the Exchange if such expiration months are opened for 
trading on at least one other national securities exchange.\11\
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    \11\ See Securities Exchange Act Release No. 64518 (May 19, 
2011), 76 FR 30409 (May 25, 2011) (SR-NYSEArca-2011-28).
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Retire Additional Expiration Months Pilot and Adopt Amended Rules

    The Exchange established the Pilot Program for competitive reasons. 
Now that the Exchange has the ability to match the expiration listings 
of other exchanges \12\ (that may exceed six expirations and may occur 
on a regular basis) the Exchange believes that the Pilot Program is no 
longer necessary and is proposing to retire it. To effect this change, 
the Exchange is proposing to delete the text of Commentary .09 to Rule 
6.4, which sets forth the terms of the Pilot Program, which is 
currently scheduled to expire on October 31, 2011.\13\
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    \12\ See Commentary .12 to Rule 6.4.
    \13\ The Exchange proposes to mark Commentary .09 to Rule 6.4 as 
``Reserved.''
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    As noted, the Exchange's ability to match the expirations listed by 
other exchanges is set forth in Commentary .12 to Rule 6.4. This 
provision, however, only provides the Exchange with the ability to 
match expirations initiated by other options exchanges. To encourage 
competition and to place the Exchange on a level playing field, the 
Exchange should have the same ability as PHLX and NOM to initiate 
expirations. Therefore, the Exchange is proposing to harmonize its 
rules with the rules of PHLX and NOM by clarifying that NYSE Arca will 
open at least one expiration month and one series for each class open 
for trading on the Exchange. To effect this change, the Exchange is 
proposing to amend the text of Rule 6.4(a) to track the rule text of 
NOM Chapter IV, Section 6 and PHLX Rule 1012.
    Finally, the Exchange is proposing to slightly modify Rule 6.4 
regarding the opening of additional series. Specifically, the Exchange 
proposes to amend Rule 6.4(a) to permit the listing of additional 
series when (among other reasons) the market price of the underlying 
stock moves more than five strike prices from the initial exercise 
price or prices.\14\ Currently, Rule 6.4(a) permits the listing of 
additional series when the market price of the underlying stock moves 
substantially from the initial exercise price or prices. This proposed 
rule change again tracks PHLX and NOM's existing rule text.
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    \14\ Rule 6.4(a) would also be amended to permit the Exchange to 
add additional series of options of the same class when the Exchange 
deems it necessary to maintain an orderly market and to meet 
customer demand. These ``additional series'' provisions are similar 
to existing provisions in NOM Chapter IV, Section 6 and PHLX Rule 
1012.
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    The Exchange believes the proposed rule change is proper, and 
indeed necessary, in light of the need to have rules that do not put 
the Exchange at a competitive disadvantage. The Exchange's proposal 
puts the Exchange in the same position as PHLX and NOM and provides the 
Exchange with the same ability to initiate and match identical 
expirations across exchanges for products that are multiply-listed and 
fungible with one another. The Exchange believes that the proposed rule 
change should encourage competition and be beneficial to traders and 
market participants by providing them with a means to trade on the 
Exchange securities that are initiated by the Exchange and listed and 
traded on other exchanges.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
withSection 6(b) of the Act,\15\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\16\ inparticular, because 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

[[Page 66109]]

general, to protect investors and the public interest. In particular, 
the proposed rule change would permit the Exchange to accommodate 
requests made by OTP Holders and other market participants to list 
additional expiration months and thus encourages competition without 
harming investors or the public interest.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 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 \17\ and Rule 19b-
4(f)(6) thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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 should promote competition by allowing 
the Exchange, without undue delay, to incorporate rules that previously 
have been adopted by other exchanges and thereby to list and trade 
option series that are trading on those other options exchanges. 
Therefore, the Commission designates the proposal operative upon 
filing.\19\
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    \19\ 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2011-73 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-2011-73. 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 website 
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-2011-73 and should be submitted on or before November 15, 
2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-27521 Filed 10-24-11; 8:45 am]
BILLING CODE 8011-01-P