Document ID: SEC-2006-1318-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.
Posted Date: 2006-10-10T04:00Z

[Federal Register: October 10, 2006 (Volume 71, Number 195)]
[Notices]               
[Page 59576-59577]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10oc06-98]                         

[[Page 59576]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54541; File No. SR-NYSEArca-2006-66]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to the 
Exercise Deadline for Quarterly Options Series

September 29, 2006.
    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 September 25, 2006, NYSE Arca, Inc. (``NYSE Arca''or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'' or 
``SEC'') the proposed rule change as described in Items I and II below, 
which Items have been substantially prepared by the Exchange. The 
Commission has designated this proposed rule change as non-
controversial under Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 
19b-4(f)(6) thereunder,\4\ which renders the proposed rule change 
effective upon filing with the Commission. 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\ CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 Rule 6.24(c) by adding a 
provision regarding the exercise cut-off time for Quarterly Option 
Series. The text of the proposed rule change, as amended, is set forth 
below. Proposed new language is in italics.
* * * * *

Rules of NYSE Arca, Inc.

Rule 6 Option Contracts Traded on the Exchange

* * * * *

Rule 6.24. Exercise of Option Contracts

    (a)-(b)--No change.
    (c) Exercise cut-off time. Option holders have until 2:30 p.m. 
(PST) on the business day immediately prior to the expiration date or, 
in the case of Quarterly Options Series, on the expiration date, to 
make a final decision to exercise or not exercise an expiring option. 
For customer accounts, OTP Holders and OTP Firms may not accept 
exercise instructions after 2:30 p.m. (PST) but have until 3:30 p.m. 
(PST) to submit a Contrary Exercise Advice. For non-customer accounts, 
OTP Holders and OTP Firms may not accept exercise instructions after 
2:30 p.m. (PST) but have until 3:30 p.m. (PST) to submit a Contrary 
Exercise Advice if such OTP Holders and OTP Firms employs an electronic 
submission procedure with time stamp for the submission of exercise 
instructions by option holders. Consistent with Commentary .04, OTP 
Holders and OTP Firms are required to submit a Contrary Exercise Advice 
by 2:30 p.m. (PST) for non-customer accounts if such OTP Holders and 
OTP Firms do not employ an electronic submission procedure with time 
stamp for the submission of exercise instructions by option holders.
    (d)-(g)--No change.
* * * * *

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 Exchange 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 these 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 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 Exchange proposes to amend its rule to add a provision to Rule 
6.24(c) addressing the exercise cut-off time for Quarterly Option 
Series. Presently, option holders have until 2:30 p.m. (Pacific Time) 
on the business day immediately prior to the expiration date to make a 
decision to exercise or not to exercise an expiring option (standard 
equity and index options). Standard listed options expire on the third 
Saturday of a month. Option holders make their decision whether or not 
to exercise based on the closing price of the underlying security on 
the last trading day of any given option series' cycle, typically the 
Friday immediately before the expiration Saturday. Unlike standard 
listed options, Quarterly Option Series expire on the last business day 
of a calendar quarter. If an option holder were to be required to make 
a decision to exercise or not exercise a Quarterly Option Series on the 
day before the expiration of the option, they would have to make that 
decision without the knowledge of what the closing price of the 
underlying security would be on expiration. The Exchange is now 
proposing to add a provision to NSYE Arca Rule 6.24(c) that will 
designate a new exercise cut-off time for Quarterly Options Series. The 
new proposed time will be 2:30 p.m. (Pacific Time) on the day that the 
quarterly option expires. This change will allow option holders the 
full time needed to make an accurate decision whether or not to an 
exercise an expiring option.
2. Statutory Basis
    The Exchange believes that the proposed rule is consistent with 
Section 6(b) of the Act \5\ in general, and Section 6(b)(5) of the 
Act,\6\ that the rules of an exchange be designed to promote just and 
equitable principles of trade, to prevent fraudulent and manipulative 
acts and practices, and, in general, to protect investors and the 
public interest.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will not 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 Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \7\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\8\ Because the foregoing proposed rule change (i) Does not 
significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) the proposed rule change does not become operative for 30 
days after the date on which it was filed, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest, the proposed rule change has become effective 
pursuant to Section

[[Page 59577]]

19(b)(3)(A) of the Act and Rule 19b-4(f)(6)(iii) thereunder.\9\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ Rule 19b-4(f)(6)(iii) requires the Exchange to give written 
notice to the Commission of its intent to file the proposed rule 
change five business days prior to filing. The Commission has 
determined to waive the five-day pre-filing requirement for this 
proposal.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to waive the operative 
delay if such action is consistent with the protection of investors and 
the public interest. The Exchange has asked the Commission to waive the 
operative delay to permit the proposed rule change to become effective 
prior to the 30th day after filing.
    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Waiving the operative delay will allow the Exchange to permit exercise 
of a Quarterly Options Series at any time until the close of business 
on its expiration date starting with the third quarter 2006 expirations 
on Friday, September 29, 2006, and consequently will benefit investors. 
Therefore the Commission has determined to waive the 30-day delay and 
allow the proposed rule change to become operative immediately.\10\
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    \10\ For purposes only of waiving the operative delay of this 
proposal, the Commission notes that it has considered the proposed 
rule's impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
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    At any time within sixty (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.

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-2006-66 on the subject line.

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-2006-66. 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. 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-2006-66 and should be submitted on or before 
October 31, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E6-16625 Filed 10-6-06; 8:45 am]

BILLING CODE 8011-01-P