Document ID: SEC-2009-1735-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Amex LLC
Posted Date: 2009-12-09T05:00Z

[Federal Register: December 9, 2009 (Volume 74, Number 235)]
[Notices]               
[Page 65193-65195]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09de09-117]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61106; File No. SR-NYSEAmex-2009-74]

 
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Extend the Penny 
Pilot Through December 31, 2010

December 3, 2009.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on October 26, 2009, NYSE Amex LLC (``NYSE Amex'' or the 
``Exchange'') 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 self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 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 its option trading rules to (i) 
extend the Penny Pilot in options classes in certain issues (``Pilot 
Program'') previously approved by the Securities and Exchange 
Commission (``Commission'') through December 31, 2010; and (ii) expand 
the number of issues included in the Pilot. The text of the proposed 
rule change is attached as Exhibit 5 to the 19b-4 form. 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.

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 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.

[[Page 65194]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange hereby proposes to extend the time period of the Pilot 
Program \4\ which is currently scheduled to expire on October 31, 2009, 
through December 31, 2010. Moreover, the Exchange proposes the 
following changes to its Penny Pilot Program which are consistent with 
recent changes to the NYSE Arca Penny Pilot Program.\5\
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    \4\ See Securities Exchange Act Release No. 34-55162 (January 
24, 2007), 72 FR 4738 (February 1, 2007); Securities Exchange Act 
Release No. 34-56567 (September 27, 2007), 72 FR 56396 (October 3, 
2007).
    \5\ See Securities Exchange Act Release No. 60711 (September 23, 
2009), 74 FR 49419 (September 28, 2009) (Order Granting Partial 
Accelerated Approval of a Proposed Rule Change, as Modified by 
Amendment Nos. 1 and 3 Thereto, Amending NYSE Arca Rule 6.72 and 
Expanding the Penny Pilot Program); see also Securities Exchange Act 
Release No. 60833 (October 16, 2009), 74 FR 54617 (October 22, 2009) 
(notice of filing and immediate effectiveness of SR-NYSEArca-2009-
91).
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    Top 300:
    The Exchange also proposes to expand the number of issues included 
in the Pilot Program. Specifically, NYSE Amex proposes to add the top 
300 most actively traded multiply listed options classes that are not 
yet included in the Pilot Program (``Top 300''). The Exchange proposes 
to determine the identity of the Top 300 based on national average 
daily volume over a six month period preceding their addition to the 
Pilot Program, as set forth below.\6\ In determining the identity of 
the Top 300, the Exchange will exclude options classes with high 
premiums. Pursuant to Commentary .02 to NYSE Amex Rule 960NY, the Pilot 
Program issues will be announced to the Exchange's membership via 
Regulatory Bulletin and published by the Exchange on its Web site.\7\ 
This will bring the total number of options classes traded pursuant to 
the Pilot Program to 363. NYSE Amex represents that the Exchange has 
the necessary system capacity to support any additional series listed 
as part of the Pilot Program.
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    \6\ The Exchange will not include options classes in which the 
issuer of the underlying security is subject to an announced merger 
or is in the process of being acquired by another company, or if the 
issuer is in bankruptcy. For purposes of assessing national average 
daily volume, the Exchange will use data compiled and disseminated 
by the Options Clearing Corporation.
    \7\ The Exchange shall also identify the classes to be added to 
the Pilot Program, per each phase, in a filing with the Commission.
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    NYSE Amex believes that it is appropriate to exclude high priced 
underlying securities, as the benefit to the public from including such 
issues is minimal because of the high price of at-the-money options.\8\ 
The Exchange believes an appropriate threshold for designation as 
``high priced'' at the time of selection of new issues to be included 
in the Pilot is $200 per share or a calculated index value of 200. At 
$200 per share or a calculated index value of 200, strike prices are in 
$10 increments, so the ``at the money'' strike is more likely to carry 
an intrinsic value of $3 or more, and thus not trade in a penny 
increment. With a greater distance between strikes, there are fewer 
series that are actively traded. The determination of whether a 
security is trading above $200 or above a calculated index value of 200 
shall be based on the price at the close of trading on the Expiration 
Friday prior to being added to the Pilot. This approach is consistent 
with the approach NYSE Amex has taken for high-priced issues when 
selecting Pilot issues in the past.
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    \8\ For instance, as of August 12, 2009, the near term at the 
money call in GOOG (August 460 Calls) was trading at $6.50 with the 
underlying at $459.84. The lowest strike price September call 
trading below $3 (with the underlying at the same price) was the 
September 500 Call.
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    Phased Implementation:
    The Exchange proposes to phase-in the additional classes to the 
Pilot Program over four successive quarters. Specifically, the Exchange 
proposes to add 75 classes on November 2, 2009; February 1, 2010; May 
3, 2010; and August 2, 2010. The issues to be added on November 2, 2009 
will be based on the most actively traded multiply listed issues for 
the six month period from April 1, 2009 through September 30, 2009. The 
issues to be added on February 1, 2010 will be based on the most 
actively traded multiply listed issues for the six month period from 
July 1, 2009 through December 31, 2009. The issues to be added on May 
3, 2010 will be based on the most actively traded multiply listed 
issues for the six month period from October 1, 2009 through March 31, 
2010. The issues to be added on August 2, 2010 will be based on the 
most actively traded multiply listed issues for the six month period 
from January 1, 2010 through June 30, 2010.
    Delistings:
    Additionally, the Exchange proposes that any Pilot Program issues 
that have been delisted may be replaced on a semi-annual basis by the 
next most actively traded multiply listed options classes that are not 
yet included in the Pilot, based on trading activity in the previous 
six months. The replacement issues would be added to the Pilot Program 
on the second trading day following January 1, 2010 and July 1, 
2010.\9\
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    \9\ The replacement issues will be announced to the Exchange's 
membership via Regulatory Bulletin and published by the Exchange on 
its Web site.
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    Report:
    The Exchange agrees to submit semi-annual reports to the Commission 
that will include sample data and analysis of information collected 
from April 1 through September 30, and from October 1 through March 31, 
for each year, for the ten most active and twenty least active options 
classes added to the Pilot Program, in addition to continuing to 
provide data concerning the existing Pilot Program classes. As the 
Pilot Program matures and expands, the Exchange believes that this 
proposed sampling approach provides an appropriate means by which to 
monitor and assess the Pilot Program's impact. The Exchange will also 
identify, for comparison purposes, a control group consisting of the 
ten least active options classes from the existing Pilot Program 
classes. This report will include, but is not limited to: (1) Data and 
analysis on the number of quotations generated for options included in 
the report; (2) an assessment of the quotation spreads for the options 
included in the report; (3) an assessment of the impact of the Pilot 
Program on the capacity of the Exchange's automated systems; (4) data 
reflecting the size and depth of markets, and (5) any capacity problems 
or other problems that arose related to the operation of the Pilot 
Program and how the Exchange addressed them.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
and furthers the objectives of Section 6(b)(5) of the Act,\10\ in that 
it is designed to prevent fraudulent and manipulative practices, to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanisms of a free and open market and a national 
market system and, in general, to protect investors and the public 
interest.
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    \10\ 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.

[[Page 65195]]

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)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from 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 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6)(iii) thereunder.\14\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of the filing.\15\ 
However, pursuant to Rule 19b-4(f)(6)(iii),\16\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Commission believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because doing so will 
allow the Exchange to extend the Penny Pilot Program without 
interruption and expand the Penny Pilot Program on the same schedule as 
the other exchanges. Accordingly, the Commission designates the 
proposed rule change as operative upon filing with the Commission.\17\
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    \15\ 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 the 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 pre-filing requirement.
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ For purposes only of waiving the operative delay for this 
proposal, 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 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-NYSEAmex-2009-74 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-NYSEAmex-2009-74. 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 the filing also will be available for 
inspection and copying at the principal office of the self-regulatory 
organization. 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-
NYSEAmex-2009-74 and should be submitted on or before December 30, 
2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-29302 Filed 12-8-09; 8:45 am]

BILLING CODE 8011-01-P