Document ID: SEC-2009-1568-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Add Commentary .04 to Rule 904C
Posted Date: 2009-11-06T05:00Z

[Federal Register: November 6, 2009 (Volume 74, Number 214)]
[Notices]               
[Page 57542-57544]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06no09-108]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60907; File No. SR-NYSEAmex-2009-73]

 
Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Add Commentary 
.04 to Rule 904C

October 30, 2009.

    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on October 19, 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\ 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 add Commentary .04 to Rule 904C to clarify 
position limits on reduced-value index options. 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.

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

1. Purpose
    The Exchange proposes to define and clarify the treatment of 
positions in reduced-value index options. NYSE Amex Rule 904C describes 
Position Limits for both Broad Stock Index Groups and Stock Index 
Industry Groups. Rule 904C does not describe aggregation requirements 
for reduced-value index options, nor does it describe the relationship 
of a position in a reduced-value index option to a position in a full-
value index option.
    Occasionally, when an index level is high it becomes less desirable 
for trading options because of the large amount of capital involved in 
maintaining margin. Additionally, because of the linear nature of 
options premiums, the premium for an at-the-money call on an index 
level of 500 will be ten times the premium for an at-the-money call at 
an index level of 50, and thus more expensive to trade. To

[[Page 57543]]

address this situation, the Exchange may list options on a reduced-
value index, in which the full index value is divided by a set amount, 
and the new, reduced-value index becomes the underlyer for a class of 
options.
    NYSE Amex is proposing to add Commentary .04 to Rule 904C to 
require positions in reduced-value index options to be aggregated with 
any positions in options on the full-value of the same index. 
Additionally, Commentary .04 will explicitly state that the positions 
in reduced-value index options will be treated in the same ratio to a 
full-value index option position as the ratio between the reduced value 
index and the full value index. The Commentary is based on similar rule 
provisions of the Chicago Board Options Exchange, Inc. (``CBOE''), 
NASDAQ OMX PHLX (``PHLX''), and NYSE Arca, Inc.\3\
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    \3\ See CBOE Rule 24.4(d) and 24.4A(c); PHLX Rule 1001A (e); and 
NYSE Arca Rule 5.15(c).
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    As an example, suppose that the Exchange listed options on the XXX 
narrow based index, and that the index had a position limit determined 
by Rule 904C of 31,500 contracts. If the Exchange then listed options 
on a one-fifth reduced-value of XXX, and designated it as XXR, then the 
position of one contract in XXR would be treated as the equivalent to 
one-fifth of a contract in XXX. The resultant position limit for XXR 
would be 157,500 contracts (5 x 31,500).
    Positions in XXX and XXR would be aggregated such that the 
combination of XXX contracts and one-fifth of XXR contracts could not 
exceed 31,500.
    The Exchange believes that definition and clarification of the 
requirements for the treatment of positions in reduced value index 
options will reduce confusion regarding the application of the Rules 
and ensure compliance with position limit requirements.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) \4\ of the Securities Exchange Act of 1934 (the ``Act''), 
in general, and furthers the objectives of Section 6(b)(5) \5\ in 
particular in that it is designed to promote just and equitable 
principles if trade, to prevent fraudulent and manipulative acts, to 
remove impediments to and to perfect the mechanism for a free and open 
market and a national market system and, in general, to protect 
investors and the public interest, by requiring positions in reduced-
value index options to be aggregated with any positions in full-value 
index options, and to clarify how contracts in reduced-value index 
options are counted.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 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 rule change does not: (1) Significantly 
affect the protection of investors or the public interest; (2) impose 
any significant burden on competition; and (3) become operative for 30 
days after the date of this filing, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \6\ and Rule 19b-4(f)(6) thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) normally may not 
become operative prior to 30 days after the date of filing.\8\ However, 
Rule 19b-4(f)(6)(iii) \9\ permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange has requested that the Commission 
waive the 30-day operative delay. The Exchange notes that the proposal 
is substantially similar to the rules of other options exchanges \10\ 
and serves to treat NYSE Amex users with positions in reduced-value 
index options in the same manner as they would be treated on the other 
options exchanges. In addition, the Exchange notes that waiving the 30-
day operative delay will allow it to immediately offer market 
participants options in reduced value index products on the same basis 
as they are offered on other exchanges. Based on the foregoing, the 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest and 
hereby designates the proposal as operative upon filing with the 
Commission.\11\
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    \8\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires that a self-regulatory organization 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.
    \9\ Id.
    \10\ See supra note 3.
    \11\ For the purposes only of waiving the 30-day operative 
delay, 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 such 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-2009-73 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-2009-73. 
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

[[Page 57544]]

available for inspection and copying in the Commission's Public 
Reference Room 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-NYSEAmex-2009-73 and should 
be submitted on or before November 27, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Florence E. Harmon,
Deputy Secretary.
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    \12\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E9-26749 Filed 11-5-09; 8:45 am]

BILLING CODE 8011-01-P