Document ID: SEC-2006-0652-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.
Posted Date: 2006-05-22T04:00Z

[Federal Register: May 22, 2006 (Volume 71, Number 98)]
[Notices]               
[Page 29373-29375]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22my06-105]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53807; File No. SR-NYSEArca-2006-14]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Extend Until 
June 5, 2007, a Pilot Program for Listing Options on Selected Stocks 
Trading Below $20 at One-Point Intervals

May 15, 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 May 8, 2006, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared

[[Page 29374]]

by the Exchange. The Exchange filed the proposal pursuant to Section 
19(b)(3)(A) of the Act,\3\ and Rule 19b-4(f)(6) thereunder,\4\ which 
renders the proposal 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\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \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

    NYSE Arca proposes to amend Commentary .04 to NYSE Arca Rule 6.4, 
``Series of Options Open for Trading,'' to extend until June 5, 2007, 
its pilot program for listing options series on selected stocks trading 
below $20 at one-point intervals (``Pilot Program''). The text of the 
proposed rule change is available on NYSE Arca's Web site (http://www.nysearca.com
), at NYSE Arca'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 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 purpose of this proposal is to extend for one year the 
Exchange's Pilot Program. The current Pilot Program expires on June 5, 
2006. NYSE Arca notes that OTP Firms have expressed a continued 
interest in listing additional strike prices on low-priced stocks so 
that they can provide their customers with greater flexibility in their 
investment choices. For this reason, the Exchange proposes to extend 
the Pilot Program. The Exchange notes that all of the issues eligible 
to be included in the Pilot Program, the procedures for adding $1 
strike prices, the procedures for phasing out $2.50 strike prices, the 
prohibition against listing long-term options (also known as ``LEAPS'') 
in equity option classes at $1 strike intervals, the procedures for 
adding expiration months, and the procedures for deleting $1 strike 
prices will remain the same. In support of the Exchange's proposal to 
extend the Pilot Program until June 5, 2007, the Exchange is submitting 
to the Commission a report (the ``Pilot Program Report''), attached as 
Exhibit 3 to the proposal, that offers detailed data from, and analysis 
of, the Pilot Program.
2. Statutory Basis
    The Exchange believes that the continuation of $1 strike prices 
will stimulate customer interest in options overlying lower-priced 
stocks by creating greater trading opportunities and flexibility. The 
Exchange further believes that continuation of $1 strike prices will 
provide customers with the ability to more closely tailor investment 
strategies to the precise movement of the underlying security. For 
these reasons, the Exchange believes the proposed rule change is 
consistent with the Act and the rules and regulations thereunder and, 
in particular, the requirements of Section 6(b) of the Act.\5\ 
Specifically, the Exchange believes the proposed rule change is 
consistent with the requirements under Section 6(b)(5) of the Act \6\ 
that the rules of a national securities exchange be designed to promote 
just and equitable principles of trade, to prevent fraudulent and 
manipulative acts, to remove impediments to and perfect the mechanism 
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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    \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 does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in the 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

    Written comments on the proposed rule change were neither solicited 
nor received.

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

    NYSE Arca 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: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, 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 and Rule 19b-4(f)(6) thereunder.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
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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 designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. In addition, Rule 19b-4(f)(6)(iii) requires a 
self-regulatory organization to provide the Commission with written 
notice of its 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. NYSE Arca has 
asked the Commission to waive the five-day pre-filling notice 
requirement \9\ and the 30-day operative delay to allow the Exchange to 
continue to list the same options series listed on other options 
exchanges and to provide the public with the benefits of price 
competition and added liquidity in these series.
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    \9\ Telephone conversation between Glenn H. Gsell, Director, 
NYSE Arca Regulation, and Theodore S. Venuti, Attorney, Division of 
Market Regulation, Commission, on May 10, 2006.
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    The Commission waives the five-day pre-filing notice requirement. 
In addition, the Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest because it will allow the Pilot Program to continue without 
interruption through June 5, 2007.\10\ For this reason, the Commission 
designates that the proposal become operative on June 5, 2006.\11\
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    \10\ 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. 15 U.S.C. 78c(f).
    \11\ As set forth in the Commission's initial approval of the 
Pilot Program and in its order extending the operation of the Pilot 
Program through June 5, 2005, if NYSE Arca proposes to: (1) Extend 
the Pilot Program; (2) expand the number of options eligible for 
inclusion in the Pilot Program; or (3) seek permanent approval of 
the Pilot Program, it must submit a Pilot Program report to the 
Commission along with the filing of its proposal to extend, expand, 
or seek permanent approval of the Pilot Program. NYSE Arca must file 
any such proposal and the Pilot Program report with the Commission 
at least 60 days prior to the expiration of the Pilot Program. The 
Pilot Program report must cover the entire time the Pilot Program 
was in effect and must include: (1) Data and written analysis on the 
open interest and trading volume for options (at all strike price 
intervals) selected for the Pilot Program; (2) delisted options 
series (for all strike price intervals) for all options selected for 
the Pilot Program; (3) an assessment of the appropriateness of $1 
strike price intervals for the options NYSE Arca selected for the 
Pilot Program; (4) an assessment of the impact of the Pilot Program 
on the capacity of NYSE Arca's, the Options Price Reporting 
Authority's, and vendors' automated systems; (5) any capacity 
problems or other problems that arose during the operation of the 
Pilot Program and how NYSE Arca addressed them; (6) any complaints 
that NYSE Arca received during the operation of the Pilot Program 
and how NYSE Arca addressed them; and (7) any additional information 
that would help to assess the operation of the Pilot Program. See 
Securities Exchange Act Release Nos. 48945 (June 17, 2003), 68 FR 
37594 (June 24, 2003) (File No. SR-PCX-2003-28) (order approving the 
Pilot Program through June 5, 2004); and 50152 (August 5, 2004), 69 
FR 49931 (August 12, 2004) (File No. SR-PCX-2004-61) (order 
approving the extension of the Pilot Program through June 5, 2005).

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[[Page 29375]]

    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 No. SR-NYSEAcra-2006-14 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 No. SR-NYSEArca-2006-14. 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 will also be available for inspection and copying at the 
principal office of NYSE Arca. 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 No. SR-NYSEArca-2006-14 and should be submitted on or before June 
12, 2006.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E6-7720 Filed 5-18-06; 8:45 am]

BILLING CODE 8010-01-P