Document ID: SEC-2009-0339-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2009-03-13T04:00Z

[Federal Register: March 13, 2009 (Volume 74, Number 48)]
[Notices]               
[Page 10980-10981]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13mr09-114]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59525; File No. SR-NYSEArca-2009-16]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Its 
Schedule of Fees and Charges Applicable to the Option Strategy 
Executions Pilot Program

March 6, 2009.
    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 27, 2009, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Exchange filed the proposal pursuant to Section 
19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(2) thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 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 is proposing 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, 2010. The text of the 
proposed rule change is attached as Exhibit 5.\5\ 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.
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    \5\ The Commission notes that while provided in Exhibit 5 to the 
filing, the text of the proposed rule change is not attached to this 
notice but is available at NYSE Arca, the Commission's Public 
Reference Room, and at http://www.nyse.com.
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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. The text of these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
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 this proposed rule change is to extend the Pilot 
Program that applies to Option Strategy Executions until March 1, 2010. 
The transactions included as part of the Pilot Program include 
reversals and conversions,\6\ dividend spreads,\7\ box spreads,\8\ 
short stock interest spreads,\9\ and merger spreads.\10\ 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

[[Page 10981]]

accommodating these transactions. Extending the Pilot Program until 
March 1, 2010 will allow the Exchange to keep these fees low and thus 
continue to attract liquidity.
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    \6\ 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.
    \7\ Dividend spreads are trades involving deep in the money 
options that exploit pricing differences arising around the time a 
stock goes ex-dividend.
    \8\ Box Spreads 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.
    \9\ 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.
    \10\ 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 proposal is consistent with Section 6(b) \11\ of the Act, in 
general, and Section 6(b)(4),\12\ in particular, in that it provides 
for the equitable allocation of dues, fees and other charges among its 
members. 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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    \11\ 15 U.S.C. 78f(b).
    \12\ 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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing proposed rule change has become effective upon filing 
pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(2) 
\14\ thereunder 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.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 19b-4(f)(2).
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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-2009-16 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-2009-16. 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 Number SR-NYSEArca-2009-16 and should 
be submitted on or before April 3, 2009.
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    \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. E9-5388 Filed 3-12-09; 8:45 am]

BILLING CODE 8011-01-P