[Federal Register Volume 74, Number 100 (Wednesday, May 27, 2009)]
[Notices]
[Pages 25294-25295]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-12217]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59944; File No. SR-NYSEArca-2009-44]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Amending Rule 6.72 Governing Trading
Differentials and Proposing To Expand the Penny Pilot
May 20, 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 May 15, 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 240.19-4.
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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 its option trading rules to (i)
extend the Penny Pilot in options classes in certain issues (``Pilot
Program'') previously approved by the Securities and Exchange
Commission (``Commission'') through December 31, 2010, (ii) provide for
additional classes to quote and trade all contracts in one cent ($0.01)
increments, and (iii) expand the number of issues included in the
Pilot. The text of the proposed rule change is attached as Exhibit
5.\4\ 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.
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\4\ The Commission notes that while provided in Exhibit 5 to the
filing, the text of the proposed rule change is not attached to this
notice, but is available at the Commission's Public Reference Room
and at http://www.nyse.com.
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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 Exchange hereby proposes to extend the time period of the Pilot
Program \5\ which is currently scheduled to expire on July 3, 2009,
through December 31, 2010.
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\5\ See Securities Exchange Act Release No. 34-55156 (January
23, 2007), 72 FR 4759 (February 21, 2007); Securities Exchange Act
Release No. 34-56568 (September 27, 2007), 72 FR 56422 (October 3,
2007); Securities Exchange Act Release No.34-59628 (March 26, 2009),
74 FR 15025 (April 2, 2009).
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Top 300
The Exchange also proposes to expand the number of issues included
in the Pilot Program. Specifically, NYSE Arca proposes to add the top
300 most actively traded multiply listed options classes that are not
yet included in the Pilot Program (``Top 300''). The Exchange proposes
to determine the identity of the Top 300 based on national average
daily volume in the prior six calendar months immediately preceding
their addition to the Pilot Program.\6\ In determining the identity of
the Top 300, the Exchange will exclude options classes with high
premiums. Pursuant to Commentary .02 to NYSE Arca Rule 6.72, the Pilot
Program issues will be announced to the Exchange's membership via
Regulatory Bulletin and published by the Exchange on its website.\7\
This will bring the total number of options classes traded pursuant to
the Pilot Program to 363. NYSE Arca represents that the Exchange has
the necessary system capacity to support any additional series listed
as part of the Pilot Program.
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\6\ The Exchange will not include options classes in which the
issuer of the underlying security is subject to an announced merger
or is in the process of being acquired by another company, or if the
issuer is in bankruptcy. For purposes of assessing national average
daily volume, the Exchange will use data compiled and disseminated
by the Options Clearing Corporation.
\7\ The Exchange shall also identify the classes to be added to
the Pilot Program, per each phase, in a filing with the Commission.
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Phased Implementation
The Exchange proposes to phase-in the additional classes to the
Pilot Program over four successive quarters. Specifically, the Exchange
proposes to add 75 classes in July 2009, October 2009, January 2010,
and April 2010. In order to reduce operational confusion and provide
for appropriate time to update databases, the Exchange proposes to add
the eligible issues to the Pilot Program effective for trading on the
Monday ten days after Expiration Friday. Thus, the quarterly additions
would be effective on July 27, 2009; October 26, 2009; January 25,
2010; and April 26, 2010.\8\
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\8\ For purposes of identifying the issues to be added per
quarter, the Exchange shall use data from the prior six calendar
months immediately preceding the implementation month. For example,
the quarterly additions to be added on July 27, 2009 shall be
determined using data from the sixth month period ending June 30,
2009.
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Exchange Designations
The Exchange further proposes to designate two Pilot Program issues
as eligible to quote and trade all options contracts in one cent
increments, regardless of premium value. Specifically, the Exchange
proposes to so designate SPY (SPDR S&P 500 ETF) and IWM (iShares
Russell 2000 Index Fund). In selecting these issues, the Exchange
considered, among other things, that these symbols are (a) among the
most actively traded issues nationally, with a wide array of investor
[[Page 25295]]
interest, (b) have more series trading at a premium between $3 and $10,
and (c) are trading at prices that are neither extremely low nor high,
but are generally trading between $15-$50. The Exchange believes that
issues that meet these criteria benefit the most from the ability to
quote and trade all options in penny increments.
Delistings
Additionally, the Exchange proposes that any Pilot Program issues
that have been delisted may be replaced on a semi-annual basis by the
next most actively traded multiply listed options classes that are not
yet included in the Pilot, based on trading activity in the previous
six months. The replacement issues would be added to the Pilot on the
second trading day following January 1, 2010 and July 1, 2010.\9\
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\9\ The replacement issues will be announced to the Exchange's
membership via Regulatory Bulletin and published by the Exchange on
its Web site.
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Report
The Exchange agrees to submit semi-annual reports to the Commission
that will include sample data and analysis of information collected
from April 1 through September 30, and from October 1 through March 31,
for each year, for the ten most active and twenty least active options
classes added to the Pilot Program.\10\ As the Pilot Program matures
and expands, the Exchange believes that this proposed sampling approach
provides an appropriate means by which to monitor and assess the Pilot
Program's impact. The Exchange will also identify, for comparison
purposes, a control group consisting of the ten least active options
classes from the existing 63 Pilot Program classes. This report will
include, but is not limited to: (1) Data and analysis on the number of
quotations generated for options included in the report; (2) an
assessment of the quotation spreads for the options included in the
report; (3) an assessment of the impact of the Pilot Program on the
capacity of the NYSE Arca's automated systems; (4) data reflecting the
size and depth of markets, and (5) any capacity problems or other
problems that arose related to the operation of the Pilot Program and
how the Exchange addressed them.
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\10\ The Exchange will continue to provide data concerning the
existing 63 Pilot Program classes.
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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.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) \11\ of
the Securities Exchange Act of 1934 (the ``Act''), in general, and
furthers the objectives of Section 6(b)(5) \12\ 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 mechanisms of a free and open market and a national market system.
The Exchange believes that the Pilot Program promotes just and
equitable principles of trade by enabling public customers and other
market participants to express their true prices to buy and sell
options.
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\11\ 15 U.S.C. 78f(b).
\12\ 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
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
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 Number SR-NYSEArca-2009-44 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-2009-44.
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 will also be available for
inspection and copying at NYSE Arca's principal office and on its
Internet Web site at 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-2009-44 and should be submitted on or before
June 17, 2009.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-12217 Filed 5-26-09; 8:45 am]
BILLING CODE 8010-01-P