Document ID: SEC-2009-0157-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2009-02-03T05:00Z

[Federal Register: February 3, 2009 (Volume 74, Number 21)]
[Notices]               
[Page 5954-5955]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03fe09-60]                         

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SECURITIES AND EXCHANGE COMMISSION

Release No. 34-59305; File No. SR-NYSEArca-2009-04]

 
Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by NYSE Arca, Inc. Amending Rules 
Governing Flexible Exchange Options to Increase Maximum Term

January 27, 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 January 9, 2009, 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, II, 
and III 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 Exchange rules governing Flexible 
Exchange Options. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to increase the maximum 
term for FLEX Options. Currently, the maximum term for a FLEX Equity 
Options \4\ is three (3) years, provided an OTP Holder may request a 
longer term to a maximum of five (5) years,\5\ and for FLEX Index 
Options the maximum term is five (5) years.
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    \4\ Flex Equity Options includes options on specified equity 
securities or Exchange Traded Fund Shares.
    \5\ Pursuant to NYSE Arca Rule 5.32 (d)(1), upon assessment by 
the FLEX Post Official that sufficient liquidity exists, such 
request will be granted.
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    NYSE Arca is proposing to increase the maximum term for all FLEX 
Options to fifteen years and to eliminate the requirement that a FLEX 
Post Official make a liquidity assessment. The changes are being 
proposed to simplify the process and in response to investor interest 
in expanding the maximum term, in order to accommodate their desire to 
bring trades that are otherwise conducted in the over-the-counter 
(``OTC'') market to an exchange environment.
    The Exchange believes that expanding the eligible term for FLEX 
Options as proposed is important and necessary to the Exchange's 
efforts to create a product and market that provides OTP Holders, and 
other qualified investors interested in FLEX-type options, with an 
improved but comparable alternative to the OTC market in customized 
options, which can take on contract characteristics similar to FLEX 
Options but are not subject to the same maximum term restriction. By 
expanding the eligible term for FLEX Options, market participants will 
now have greater flexibility in determining whether to execute their 
customized options in an exchange environment or in the OTC market. 
NYSE Arca believes market participants benefit from being able to trade 
these customized options in an exchange environment in several ways, 
including, but not limited to the following: (1) Enhanced efficiency in 
initiating and closing out positions; (2)

[[Page 5955]]

increased market transparency; and (3) heightened contra-party 
creditworthiness due to the role of The Options Clearing Corporation 
(``OCC'') as issuer and guarantor of FLEX Options. Finally, the 
Exchange has contacted the OCC and they have confirmed that they can 
configure their systems to support FLEX Options that have a maximum 
expiration of fifteen years.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \6\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act \7\ in particular, because 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. 
Specifically, by expanding the maximum terms for Flexible Exchange 
Traded Options, the Exchange to [sic] will be able to offer market 
participants additional investment choices that come with increased 
market transparency and heightened contra-party creditworthiness, both 
of which and [sic] are consistent with Section 6(b) of the Act \8\ in 
general, and the objectives of Section 6(b)(5) of the Act.\9\
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    \6\ 15 U.S.C. 78f (b).
    \7\ 15 U.S.C. 78f (b)(5).
    \8\ Id.
    \9\ Id.
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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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
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 \12\ and Rule 19b-
4(f)(6)(iii) thereunder.\13\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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 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 the pre-filing requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\15\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.\16\
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ The Commission notes that NYSE Arca is not requesting 
waiver of the 30-day operative delay, despite including this 
language in its Notice. Telephone conference between Glenn H. Gsell, 
Managing Director, NYSE Regulation, and Kristie Diemer, Special 
Counsel, Commission, on January 8, 2009.
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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-2009-04 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-2009-04. 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 Section, 100 F Street, 
NE., Washington, DC 20549-1090 on official business days between 10 
a.m. and 3 p.m. Copies of the filing will also be available for 
inspection and copying at NYSE Arca's principal office and on its 
Internet Web site at http://www.nyse.com. 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-2009-04 and should be submitted 
on or before February 24, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-2224 Filed 2-2-09; 8:45 am]

BILLING CODE 8011-01-P