Document ID: SEC-2007-1053-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.
Posted Date: 2007-08-02T04:00Z

[Federal Register: August 2, 2007 (Volume 72, Number 148)]
[Notices]               
[Page 42460-42462]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02au07-144]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56150; File No. SR-NYSEArca-2007-56]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change as Modified by 
Amendment Nos. 1 and 2 thereto Relating to NYSE Arca Rule 6.72 and the 
Penny Pilot for Options Trading

July 26, 2007.
    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 June 18, 2007, 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 substantially prepared by NYSE Arca. On July 23, 2007, the 
Exchange filed Amendment No. 1 to the proposed rule change.\3\ The 
Exchange filed Amendment No. 2 to the proposal on July 25, 2007. The 
Exchange filed the proposal as a ``non-controversial'' proposed rule 
change pursuant to section 19(b)(3)(A) of the Act \4\ and Rule 19b-
4(f)(6) thereunder,\5\ which rendered the proposal effective upon 
filing with the Commission.\6\ The Commission is publishing this notice 
to solicit comments on the proposed rule change, as amended, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 superseded and replaced the original filing 
in its entirety.
    \4\ 15 U.S.C. 78s(b)(3)(A).
    \5\ 17 CFR 240.19b-4(f)(6).
    \6\ See Amendment No. 1.
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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 its option trading rules in order to 
extend the Penny Pilot in options classes in certain issues (``Pilot 
Program'') previously approved by the Commission through September 27, 
2007. The text of the proposed rule change is available on NYSE Arca's 
Web site at http://www.nysearca.com, at the Exchange's

[[Page 42461]]

Office of the Secretary, 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 Exchange proposes to extend the time period of the Pilot 
Program \7\ through September 27, 2007. The Exchange believes the 
benefits to public customers and other market participants who will be 
able to express their true prices to buy and sell options have been 
demonstrated to outweigh the increase in quote traffic. The Exchange 
previously filed with the Commission its economic and capacity analysis 
of the Pilot Program.\8\ The Exchange attached its report as Exhibit 3 
to the proposed rule change. The report assessed, among other things, 
the impact of the Pilot Program upon quote rates, effective spreads, 
quoted spreads, available liquidity, data mitigation, and volume 
changes.
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    \7\ See Securities Exchange Act Release No. 34-55156 (January 
23, 2007), 72 FR 4759 (February 1, 2007) (SR-NYSEArca-2006-73).
    \8\ See Exhibit 3 to proposed rule change, ``Understanding 
Economic and Capacity Impacts of the Penny Pilot'' previously 
submitted to the Commission by NYSE Arca on May 31, 2007.
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    According to the Exchange, the results detailed in the report 
indicate that the pre-pilot capacity fears were unfounded and 
unrealized and the pre-pilot predictions of spread compression were 
justified--much to the benefit of investors. The Exchange believes that 
these results strongly support the extension of the Pilot Program.
    The Exchange, pursuant to discussions with Commission staff, 
intends to file a separate request to further extend and expand the 
Pilot Program, prior to September 27, 2007.
    The Exchange agrees to submit a report to the Commission that 
includes data and written analysis of information collected from May 1, 
2007 through September 27, 2007. This report will include, but is not 
limited to: (1) Data and written analysis on the number of quotations 
generated for options selected for the Pilot Program; (2) an assessment 
of the quotation spreads for the options selected for the Pilot 
Program; (3) an assessment of the impact of the Pilot Program on the 
capacity of the NYSE Arca's automated systems; (4) any capacity 
problems or other problems that arose related to the operation of the 
Pilot Program and how the Exchange addressed them; and (5) an 
assessment of trade through complaints that were sent by the Exchange 
during the operation of the Pilot Program and how they were addressed.
2. Statutory Basis
    The Exchange believes that its proposed rule change is consistent 
with Section 6(b) of the Act \9\ in general, and furthers the 
objectives of section 6(b)(5) of the Act,\10\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments to and perfect 
the mechanism of a free and open market and a national market system.
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    \9\ 15 U.S.C. 78f(b).
    \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.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants, or Others

    On July 20, 2007, Citadel submitted a comment letter to the 
Commission in response to the Exchange's original filing regarding the 
Penny Pilot (SR-NYSEArca-2007-56).\11\ No other written comments were 
solicited or received by the Exchange.
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    \11\ The Exchange subsequently filed Amendment No. 1, which 
superseded and replaced the original filing in its entirety. 
Amendment No. 1 changed the original scope of the proposed extension 
and expansion considerably. As a result, the Exchange believes that 
Citadel's comments are no longer applicable.
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III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) thereunder,\13\ 
because the foregoing proposed rule does not: (i) Significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) 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.\14\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ The Commission notes that the effective date of the 
proposed rule change is July 23, 2007, the date on which Amendment 
No. 1 was filed.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30-days after the date of filing.\15\ 
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.\16\ The Exchange has requested that 
the Commission waive the 5-day pre-filing requirement and the 30-day 
operative delay. The Commission believes that waiving the 5-day pre-
filing requirement and the 30-day operative delay is consistent with 
the protection of investors and the public interest because such waiver 
will ensure continuity of the Exchange's rules and will allow the Penny 
Pilot Program to remain in effect without interruption. For these 
reasons, the Commission designates the proposal to be operative upon 
filing with the Commission.\17\
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    \15\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the self-regulatory organization to give the 
Commission 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.
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ 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).
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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.\18\
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    \18\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change under 
Section 19(b)(3)(C) of the Act, the Commission considers the period 
to commence on July 25, 2007, the date on which NYSE Arca submitted 
Amendment No. 2. See 15 U.S.C. 78s(b)(3)(C).

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[[Page 42462]]

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2007-56 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-2007-56. 
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 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 Number SR-NYSEArca-2007-56 and should 
be submitted on or before August 23, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E7-14991 Filed 8-1-07; 8:45 am]

BILLING CODE 8010-01-P