[Federal Register Volume 71, Number 130 (Friday, July 7, 2006)]
[Notices]
[Pages 38679-38681]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-10639]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54052; File No. SR-NYSEArca-2006-29]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Extend the One 
Week Option Series Pilot Program

June 27, 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 June 16, 2006, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 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 the Exchange. NYSE Arca has 
designated this proposal as non-controversial under Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ 
which renders the proposed rule change 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)(iii).
    \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

    The Exchange proposes to amend NYSE Arca Rule 5.19(a)(3), ``Terms 
of Index Option Contracts,'' and Commentary .07 to NYSE Arca Rule 6.4, 
``Series of Options Open for Trading,'' to extend until July 12, 2007, 
its pilot program for listing and trading One Week Option Series 
(``Pilot Program''). The text of the proposed rule change is available 
on the Exchange's Web site (http://www.nysearca.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 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 the proposed rule change is to extend the Pilot 
Program for an additional year, through July 12, 2007.\5\ The Pilot 
Program allows NYSE Arca to list and trade One Week Option Series, 
which expire one week after the date on which a series is opened. Under 
the Pilot Program, NYSE Arca may select up to five approved option 
classes on which One Week Option Series could be opened.\6\ A series 
could be opened on any Friday that is a business day and would expire 
on the next Friday that is a business day.\7\ If a Friday were not a 
business day, the series could be opened (or would expire) on the first 
business day immediately prior to that Friday.
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    \5\ The Commission approved the Pilot Program on July 12, 2005. 
See Securities Exchange Act Release No. 52013 (July 12, 2005), 70 FR 
41471 (July 19, 2005) (SR-PCX-2005-32). Under NYSE Arca Rules 5.19 
and 6.4, the Pilot Program is scheduled to expire on July 12, 2006.
    \6\ A One Week Option Series could be opened in any option class 
that satisfied the applicable listing criteria under NYSE Arca rules 
(i.e., stock options, options on Exchange Traded Fund Shares as 
defined under NYSE Arca Rule 5.3, or options on indexes). The 
Exchange could also list and trade One Week Option Series on any 
option class that is selected by another exchange that employs a 
similar pilot program.
    \7\ One Week Option Series would be settled in the same manner 
as the monthly expiration series in the same class. Thus, if the 
monthly option contract for a particular class were A.M.-settled, as 
most index options are, the One Week Option Series for that class 
also would be A.M.-settled; if the monthly option contract for a 
particular class were P.M.-settled, as most non-index options are, 
the One Week Option Series for that class also would be P.M.-
settled. Similarly, One Week Option Series for a particular class 
are physically settled or cash-settled in the same manner as the 
monthly option contract in that class.
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    For each class selected for the Pilot Program, the Exchange usually 
would open five One Week Option Series in that class for each 
expiration date. The strike price of each One Week Option Series would 
be fixed at a price per share, with at least two strike prices above 
and two strike prices below the value of the underlying security or 
calculated index value at about the time that the One Week Option 
Series is opened. NYSE Arca will not open a One

[[Page 38680]]

Week Option Series in the same week that the corresponding monthly 
option series is expiring, because the monthly option series in its 
last week before expiration is functionally equivalent to the One Week 
Option Series. The intervals between strike prices on a One Week Option 
Series would be the same as the intervals between strike prices on the 
corresponding monthly option series. Finally, NYSE Arca would aggregate 
positions in a One Week Option Series with positions in its 
corresponding monthly series for purposes of the Exchange's rules on 
position limits.
    The Exchange believes that One Week Option Series can provide 
investors with a flexible and valuable tool to manage risk exposure, 
minimize capital outlays, and be more responsive to the timing of 
events affecting the securities that underlie option contracts. While 
NYSE Arca has not listed any One Week Option Series during the first 
year of the Pilot Program, there has been significant investor interest 
in trading short-term options at the Chicago Board Options Exchange 
(``CBOE'').\8\ To have the ability to respond to customer interest in 
the future, the Exchange proposes the continuation of the Pilot 
Program.
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    \8\ CBOE filed a report with the Commission on June 13, 2006, 
stating that CBOE has listed Short Term Options Series in four 
different option classes. See Securities Exchange Act Release No. 
53984 (June 14, 2006), 71 FR 35718 (June 21, 2006) (extending CBOE's 
Short Term Option Series Pilot Program).
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    In the original proposal to establish the Pilot Program, the 
Exchange stated that if it were to propose an extension, expansion, or 
permanent approval of the program, the Exchange would submit, along 
with any filing proposing such amendments to the program, a report 
providing an analysis of the Pilot Program covering the entire period 
during which the Pilot Program was in effect.\9\ Since the Exchange did 
not list any One Week Options Series during the first year of the Pilot 
Program, there is no data available to compile such a report at this 
time. Therefore, the Exchange did not submit a report with its proposal 
to extend the Pilot Program.
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    \9\ See Form 19b-4 for File No. SR-PCX-2005-32, filed March 16, 
2005.
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2. Statutory Basis
    The Exchange believes that One Week Option Series could stimulate 
customer interest in options and provide a flexible and valuable tool 
to manage risk exposure, minimize capital outlays, and be more 
responsive to the timing of events affecting the securities that 
underlie option contracts. For these reasons, the Exchange believes 
that the proposed rule change is consistent with Section 6(b) of the 
Act \10\ in general and furthers the objectives of Section 6(b)(5) of 
the Act \11\ in particular in that it is 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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    \10\ 15 U.S.C. 78f(b).
    \11\ 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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \12\ and subparagraph (f)(6) of Rule 19b-4 
thereunder.\13\ 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) 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, 
the proposed rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act and Rule 19b-4(f)(6)(iii) thereunder. As 
required under Rule 19b-4(f)(6)(iii), the Exchange provided the 
Commission with written notice of its intent to file the proposed rule 
change at least five business before doing so.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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. The Exchange has asked the Commission to waive the 
operative delay to permit the Pilot Program extension to become 
effective prior to the 30th day after filing.
    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 benefits of the Pilot Program to continue 
without interruption.\14\ Therefore, the Commission designates that the 
proposal will become operative on July 12, 2006.\15\
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    \14\ 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. See 15 U.S.C. 
78c(f).
    \15\ As set forth in the Exchange's original filing proposing 
the Pilot Program, if the Exchange were to propose an extension, 
expansion, or permanent approval of the Pilot Program, the Exchange 
would submit, along with any filing proposing such amendments to the 
program, a report that would provide an analysis of the Pilot 
Program covering the entire period during which the Pilot Program 
was in effect. The report would include, at a minimum: (1) Data and 
written analysis on the open interest and trading volume in the 
classes for which One Week Option Series were opened; (2) an 
assessment of the appropriateness of the option classes selected for 
the Pilot Program; (3) an assessment of the impact of the Pilot 
Program on the capacity of NYSE Arca, OPRA, and market data vendors 
(to the extent data from market data vendors is available); (4) any 
capacity problems or other problems that arose during the operation 
of the Pilot Program and how NYSE Arca addressed such problems; (5) 
any complaints that NYSE Arca received during the operation of the 
Pilot Program and how NYSE Arca addressed them; and (6) any 
additional information that would assist in assessing the operation 
of the Pilot Program. The report must be submitted to the Commission 
at least sixty (60) days prior to the expiration date of the Pilot 
Program. See Form 19b-4 for File No. SR-PCX-2005-32, filed March 16, 
2005.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate the 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 [email protected]. Please include 
File No. SR-NYSEArca-2006-29 on the subject line.

[[Page 38681]]

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-2006-29. 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 Commissions 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 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-2006-29 and should be submitted on or before 
July 28, 2006.
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    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
J. Lynn Taylor,
Assistant Secretary.
 [FR Doc. E6-10639 Filed 7-6-06; 8:45 am]
BILLING CODE 8010-01-P