Document ID: SEC-2010-0722-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2010-05-17T04:00Z

[Federal Register: May 17, 2010 (Volume 75, Number 94)]
[Notices]
[Page 27608-27609]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17my10-106]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62066; File No. SR-NYSEArca-2010-37]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Establish Strike
Price Intervals and Trading Hours for Options on Index Linked
Securities

May 10, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on April 28, 2010, NYSE Arca, Inc. (``NYSE Arca'' 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\ 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 Rule 6.4 Commentary .05 to establish
strike price intervals for options on Index Linked Securities,\3\ and
to amend Rule 7.1 Commentary .02, to establish trading hours for these
products. The text of the proposed rule change is available on NYSE
Arca's Web site at http:// www.nyse.com, on the Commission's Web site
at http://www.sec.gov, and at the Commission's Public Reference Room.
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    \3\ Index-Linked Securities, also known as exchange-traded
notes, are long-term notes that are the non-convertible debt of an
issuer with a term of at least one year but not greater than thirty
years. These exchange-traded securities are designed for investors
who desire to participate in a specific market segment by providing
exposure to one or more identifiable underlying securities,
commodities, currencies, derivative instruments or market indexes.
The Exchange's listing standards for options on Index-Linked
Securities were established in July 2008. See Securities Exchange
Act Release No. 58203 (July 22, 2008), 73 FR 43812 (July 28, 2008)
(SR-NYSEArca-2008-57). Other Exchanges have established similar
listing standards. See Securities Exchange Act Release Nos. 58571
(September 17, 2008), 73 FR 55188 (September 24, 2008) (SR-Phlx-
2008-60) (notice of filing and immediate effectiveness); 59923 (May
14, 2009), 74 FR 23902 (May 21, 2009) (SR-NASDAQ-2009-046) (notice
of filing and immediate effectiveness); 58204 (July 22, 2008), 73 FR
43807 (July 28, 2008) (SR-CBOE-2008-64) (approval order); and 58985
(November 20, 2008), 73 FR 72538 (November 28, 2008) (SR-ISE-2008-
86) (notice of filing and immediate effectiveness).
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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 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.

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

1. Purpose
    The purpose of this filing is to amend Rule 6.4 Commentary .05 and
Rule 7.1 Commentary .02 to establish strike price intervals and trading
hours for options on Index-Linked Securities (``ILS''), also known as
Exchange-Traded Notes (``ETN''), prior to the Exchange actually listing
and trading these products.
    The Commission has approved the Exchange's proposal, as well as the
proposals of other options exchanges, to enable the listing and trading
of options on ILS (ETN).\4\ Options trading has not commenced to date
and is contingent upon the Commission's approval of The Options
Clearing Corporation's (``OCC'') proposed supplement to the Options
Disclosure Document (``ODD'') that will provide disclosure regarding
options on Index-Linked Securities.\5\
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    \4\ See supra Note 3.
    \5\ OCC previously received Commission approval to clear options
based on Index-Linked Securities. See Securities Exchange Act
Release No. 60872 (October 23, 2009), 74 FR 55878 (October 29, 2009)
(SR-OCC-2009-14) (approval order).
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$1 Strikes for ILS (ETN) Options
    Prior to the commencement of trading options on Index-Linked
Securities, the Exchange is proposing to establish that strike price
intervals of $1 will be permitted where the strike price is less than
$200. Where the strike price is greater than $200, $5 strikes will be
permitted. These proposed changes are reflected by the addition to
Commentary .05 to Rule 6.4.
    The Exchange is seeking to establish $1 strikes for ILS (ETN)
options where the strike price is less than $200 because the Exchange
believes the marketplace and investors will be expecting these types of
options to trade in a similar manner to options on exchange-traded
funds (``ETFs''). Strike prices for ETF options are permitted in $1 or
greater intervals where the strike price is $200 or less and $5 or
greater where the strike price is greater than $200. Accordingly, the
Exchange believes that the rationale for permitting $1 strikes for ETF
options equally applies to permitting $1 strikes for ILS (ETN) options,
and that investors will be better served if $1 strike price intervals
are available for ILS (ETN) options where the strike price is less than
$200. The Exchange believes that $1 strike price intervals for options
on Index-Linked Securities will provide investors with greater
flexibility by allowing them to establish positions that are better
tailored to meet their investment objectives.
Trading Hours for ILS (ETN) Options
    The Exchange proposes to amend Commentary .02 to Rule 7.1 to
provide that options on exchange-traded notes including Index-Linked
Securities may be traded on the Exchange until 1:15 p.m. (Pacific Time)
each business day. This will establish similar trading hours for ILS
(ETN) options as the currently-established trading hours for ETF
options.
    The Exchange expects that other option exchanges that have adopted
rules providing for the listing and trading of options on Index-Linked
Securities has or will submit similar proposals.\6\
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    \6\ See, for example, Securities Exchange Act Release No. 61466
(February 2, 2010), 75 FR 6243 (February 8, 2010) (SR-CBOE-2010-005)
(notice of filing).
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    The Exchange has analyzed its capacity and believes the Exchange
and the Options Price Reporting Authority (``OPRA'') have the necessary
systems capacity to handle the additional traffic associated with the
listing and trading of $1 strikes where the strike price is less than
$200 for ILS (ETN) options.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
Section 6(b) \7\ of the Securities Exchange Act of 1934 (the ``Act''),
in general, and furthers the objectives of Section 6(b)(5) \8\ in
particular in that it is designed to promote just and equitable
principles of trade, to prevent fraudulent and manipulative acts, to
remove

[[Page 27609]]

impediments to and to perfect the mechanism for a free and open market
and a national market system by having strike price intervals and
trading hours established prior to the commencement of trading in
options on Index-Linked Securities and thereby lessening the likelihood
for investor confusion.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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: (i) Does not
significantly affect the protection of investors or the public
interest; (ii) does not impose any significant burden on competition;
and (iii) 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, if consistent with the protection of investors and the
public interest, it has become effective pursuant to Section
19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the self-regulatory organization to submit to the
Commission 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. The Exchange has satisfied this requirement.
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    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 doing so is consistent with the
protection of investors and the public interest. The Commission notes
that it recently approved the same changes to strike price intervals
and trading hours for options on Index-Linked Securities for another
exchange.\11\ The Commission believes that the proposed changes to
strike price intervals and trading hours for options on Index-Linked
Securities do not raise any novel regulatory issues, and waiver of the
operative delay should benefit investors by creating consistency and
predictability for investors who may view these products as serving
similar investment functions in the marketplace to ETFs. Therefore, the
Commission designates the proposal operative upon filing.\12\
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    \11\ See Securities Exchange Act Release Nos. 61696 (March 12,
2010), 75 FR 13174 (March 18, 2010) (SR-CBOE-2010-005); 61943 (April
20, 2010), 75 FR 21689 (April 26, 2010) (SR-Phlx-2010-40).
    \12\ 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-NYSEArca-2010-37 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-2010-37. 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 Web site
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 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-2010-37 and should be submitted on or before June 7, 2010.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-11651 Filed 5-14-10; 8:45 am]
BILLING CODE 8010-01-P