[Federal Register Volume 73, Number 166 (Tuesday, August 26, 2008)]
[Notices]
[Pages 50375-50376]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-19782]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58385; File No. 4-443]


Joint Industry Plan; Notice of Filing and Order Approving on a 
Temporary Basis Amendment No. 2 to the Plan for the Purpose of 
Developing and Implementing Procedures Designed to Facilitate the 
Listing and Trading of Standardized Options

August 19, 2008.

I. Introduction

    On August 12, 2008, August 18, 2008, August 15, 2008, August 13, 
2008, August 8, 2008, August 14, 2008, August 14, 2008, and August 18, 
2008, the American Stock Exchange LLC (``Amex''), the Boston Stock 
Exchange, Inc. (``BSE''), Chicago Board Options Exchange, Incorporated 
(``CBOE''), the International Securities Exchange, LLC (``ISE''), The 
NASDAQ Stock Market LLC (``Nasdaq''), NYSE Arca Inc. (``NYSE Arca''), 
the Philadelphia Stock Exchange, Inc. (``Phlx''), and the Options 
Clearing Corporation (``OCC''), respectively, filed with the Securities 
and Exchange Commission (``Commission''), pursuant to section 11A of 
the Securities Exchange Act \1\ of 1934 (``Act'') and Rule 608 
thereunder,\2\ Amendment No. 2 to the Plan for the Purpose of 
Developing and Implementing Procedures Designed to Facilitate the 
Listing and Trading of Standardized Options (``the Options Listing 
Procedures Plan'' or ``OLPP'').\3\ The amendment would provide a 
uniform minimum volume threshold per underlying class to qualify for 
the introduction of a new expiration year of Long-term Equity 
AnticiPation Securities (``LEAPS'' or ``LEAP'') options. This order 
summarily puts into effect Amendment No. 2 on a temporary basis not to 
exceed 120 days and solicits comment on Amendment No. 2 from interested 
persons.\4\
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    \1\ 15 U.S.C. 78k-1.
    \2\ 17 CFR 242.608.
    \3\ On July 6, 2001, the Commission approved the OLPP, which was 
originally proposed by the Amex, CBOE, ISE, OCC, Phlx, and Pacific 
Exchange, Inc. (k/n/a NYSE Arca). See Securities Exchange Act 
Release No. 44521, 66 FR 36809 (July 13, 2001). On February 5, 2004, 
BSE was added as a sponsor to the OLPP. See Securities Exchange Act 
Release No. 49199, 69 FR 7030 (February 12, 2004). On March 21, 
2008, Nasdaq was added as a sponsor to the OLPP. See Securities 
Exchange Act Release No. 57546 (March 21, 2008), 73 FR 16393 (March 
27, 2008).
    \4\ A proposed amendment may be put into effect summarily upon 
publication of notice of such amendment, on a temporary basis not to 
exceed 120 days, if the Commission finds that such action is 
necessary or appropriate in the public interest, for the protection 
of investors or the maintenance of fair and orderly markets, to 
remove impediments to, and perfect the mechanism of, a national 
market system or otherwise in furtherance of the purposes of the 
Act. See 17 CFR 242.608(b)(4).
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II. Description of the Proposed Amendment

    Amendment No. 2 proposes to apply a uniform minimum volume 
threshold per underlying class to qualify for the introduction of a new 
expiration year of LEAP options. Currently, Participant Exchanges may 
list a new LEAP expiration year at the appropriate time without any 
consideration as to the activity level of the class of options.
    By agreeing to a minimum volume threshold per underlying class to 
qualify for an additional year of LEAP series, the Participant 
Exchanges intend to mitigate the number of option series available for 
trading. It is intended that this will in turn mitigate quote traffic, 
because Participants will not be submitting quotes in the not-listed 
series. The Plan Sponsors have agreed on a minimum volume threshold of 
1,000 contracts national average daily volume in the preceding three 
calendar months (excluding volume in LEAP and FLEX series) to qualify 
for the introduction of a new LEAP expiration year.
    In 2007, if this proposal had been in effect, the industry would 
have not added a new expiration year in 550 underlying securities, 
which would have reduced the overall number of listed series (LEAP and 
non-LEAP series) by 8%. These LEAP series generated only .43% of 
industry trading volume in a typical (non-expiration) sample week. The 
Exchanges agree that the benefit from reduced quoting levels greatly 
exceeds the small cost in missed business.
    The Amendment does not restrict the introduction of a new LEAP 
expiration year in Index options, or in classes that have had options 
products trading at any exchange for less than six months. It also does 
not restrict, for a particular options class, the introduction of new 
LEAP series with an expiration year that has already been introduced by 
at least one Exchange.
    The Commission directed the then-current options exchanges to act 
jointly to develop strategies to address overall capacity concerns in 
an Order dated September 8, 1999, as confirmed in a letter from the 
Director of the Division of Market Regulation dated September 13, 2000. 
This Amendment is an additional strategy to meet this goal.

III. Discussion

    After careful consideration, the Commission finds that the proposed 
amendment to the OLPP is consistent with the requirements of the Act 
and the rules and regulations thereunder.\5\ In particular, the 
Commission finds that the proposed amendment is consistent with the 
provisions of Section 11A of the Act \6\ and Rule 608 of Regulation NMS 
thereunder,\7\ in that it is appropriate in the public interest, for 
the protection of investors and the maintenance of fair and orderly 
markets. Specifically, the Commission believes that adopting a uniform 
minimum volume threshold per underlying class to qualify for the 
introduction of a new expiration year of LEAP options will reduce the 
number of option series available for trading, and thus may reduce 
increases in the options quote rate because market participants will 
not be submitting quotes in those series. In addition, the Commission 
finds that it is appropriate to put Amendment No.

[[Page 50376]]

2 into effect summarily upon publication of this notice on a temporary 
basis. The Commission believes that such action is appropriate in the 
public interest, for the protection of investors, and the maintenance 
of fair and orderly markets because it will allow the options exchanges 
to implement the initiative to reduce quote message traffic beginning 
immediately.
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    \5\ In approving this amendment, the Commission has considered 
its impact on efficiency, competition, and capital formation. See 
U.S.C. 78c(f).
    \6\ 15 U.S.C. 78k-1.
    \7\ 17 CFR 242.608(b)(4).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether proposed 
Amendment No. 2 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 Number 4-443 in the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number 4-443. 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 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 Exchanges. 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 4-443 and should be submitted on or before 
September 16, 2008.

V. Conclusion

    It is therefore ordered, pursuant to Section 11A of the Act,\8\ and 
Rule 608 thereunder \9\ that proposed Amendment No. 2 be, and it hereby 
is, approved on a temporary basis until December 17, 2008.
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    \8\ 15 U.S.C. 78k-1.
    \9\ 17 CFR 242.608(b)(4).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(29).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-19782 Filed 8-25-08; 8:45 am]
BILLING CODE 8010-01-P