[Federal Register Volume 75, Number 94 (Monday, May 17, 2010)]
[Notices]
[Pages 27608-27609]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-11651]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62066; File No. SR-NYSEArca-2010-37]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Establish Strike 
Price Intervals and Trading Hours for Options on Index Linked 
Securities

May 10, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on April 28, 2010, 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 and II 
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\ 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 Rule 6.4 Commentary .05 to establish 
strike price intervals for options on Index Linked Securities,\3\ and 
to amend Rule 7.1 Commentary .02, to establish trading hours for these 
products. The text of the proposed rule change is available on NYSE 
Arca's Web site at http:// www.nyse.com, on the Commission's Web site 
at http://www.sec.gov, and at the Commission's Public Reference Room.
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    \3\ Index-Linked Securities, also known as exchange-traded 
notes, are long-term notes that are the non-convertible debt of an 
issuer with a term of at least one year but not greater than thirty 
years. These exchange-traded securities are designed for investors 
who desire to participate in a specific market segment by providing 
exposure to one or more identifiable underlying securities, 
commodities, currencies, derivative instruments or market indexes. 
The Exchange's listing standards for options on Index-Linked 
Securities were established in July 2008. See Securities Exchange 
Act Release No. 58203 (July 22, 2008), 73 FR 43812 (July 28, 2008) 
(SR-NYSEArca-2008-57). Other Exchanges have established similar 
listing standards. See Securities Exchange Act Release Nos. 58571 
(September 17, 2008), 73 FR 55188 (September 24, 2008) (SR-Phlx-
2008-60) (notice of filing and immediate effectiveness); 59923 (May 
14, 2009), 74 FR 23902 (May 21, 2009) (SR-NASDAQ-2009-046) (notice 
of filing and immediate effectiveness); 58204 (July 22, 2008), 73 FR 
43807 (July 28, 2008) (SR-CBOE-2008-64) (approval order); and 58985 
(November 20, 2008), 73 FR 72538 (November 28, 2008) (SR-ISE-2008-
86) (notice of filing and immediate effectiveness).
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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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to amend Rule 6.4 Commentary .05 and 
Rule 7.1 Commentary .02 to establish strike price intervals and trading 
hours for options on Index-Linked Securities (``ILS''), also known as 
Exchange-Traded Notes (``ETN''), prior to the Exchange actually listing 
and trading these products.
    The Commission has approved the Exchange's proposal, as well as the 
proposals of other options exchanges, to enable the listing and trading 
of options on ILS (ETN).\4\ Options trading has not commenced to date 
and is contingent upon the Commission's approval of The Options 
Clearing Corporation's (``OCC'') proposed supplement to the Options 
Disclosure Document (``ODD'') that will provide disclosure regarding 
options on Index-Linked Securities.\5\
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    \4\ See supra Note 3.
    \5\ OCC previously received Commission approval to clear options 
based on Index-Linked Securities. See Securities Exchange Act 
Release No. 60872 (October 23, 2009), 74 FR 55878 (October 29, 2009) 
(SR-OCC-2009-14) (approval order).
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$1 Strikes for ILS (ETN) Options
    Prior to the commencement of trading options on Index-Linked 
Securities, the Exchange is proposing to establish that strike price 
intervals of $1 will be permitted where the strike price is less than 
$200. Where the strike price is greater than $200, $5 strikes will be 
permitted. These proposed changes are reflected by the addition to 
Commentary .05 to Rule 6.4.
    The Exchange is seeking to establish $1 strikes for ILS (ETN) 
options where the strike price is less than $200 because the Exchange 
believes the marketplace and investors will be expecting these types of 
options to trade in a similar manner to options on exchange-traded 
funds (``ETFs''). Strike prices for ETF options are permitted in $1 or 
greater intervals where the strike price is $200 or less and $5 or 
greater where the strike price is greater than $200. Accordingly, the 
Exchange believes that the rationale for permitting $1 strikes for ETF 
options equally applies to permitting $1 strikes for ILS (ETN) options, 
and that investors will be better served if $1 strike price intervals 
are available for ILS (ETN) options where the strike price is less than 
$200. The Exchange believes that $1 strike price intervals for options 
on Index-Linked Securities will provide investors with greater 
flexibility by allowing them to establish positions that are better 
tailored to meet their investment objectives.
Trading Hours for ILS (ETN) Options
    The Exchange proposes to amend Commentary .02 to Rule 7.1 to 
provide that options on exchange-traded notes including Index-Linked 
Securities may be traded on the Exchange until 1:15 p.m. (Pacific Time) 
each business day. This will establish similar trading hours for ILS 
(ETN) options as the currently-established trading hours for ETF 
options.
    The Exchange expects that other option exchanges that have adopted 
rules providing for the listing and trading of options on Index-Linked 
Securities has or will submit similar proposals.\6\
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    \6\ See, for example, Securities Exchange Act Release No. 61466 
(February 2, 2010), 75 FR 6243 (February 8, 2010) (SR-CBOE-2010-005) 
(notice of filing).
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    The Exchange has analyzed its capacity and believes the Exchange 
and the Options Price Reporting Authority (``OPRA'') have the necessary 
systems capacity to handle the additional traffic associated with the 
listing and trading of $1 strikes where the strike price is less than 
$200 for ILS (ETN) options.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) \7\ of the Securities Exchange Act of 1934 (the ``Act''), 
in general, and furthers the objectives of Section 6(b)(5) \8\ in 
particular in that it is designed to promote just and equitable 
principles of trade, to prevent fraudulent and manipulative acts, to 
remove

[[Page 27609]]

impediments to and to perfect the mechanism for a free and open market 
and a national market system by having strike price intervals and 
trading hours established prior to the commencement of trading in 
options on Index-Linked Securities and thereby lessening the likelihood 
for investor confusion.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 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

    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) by its terms, 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, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the self-regulatory organization to submit to the 
Commission written 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. The Exchange has satisfied this requirement.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Commission believes that doing so is consistent with the 
protection of investors and the public interest. The Commission notes 
that it recently approved the same changes to strike price intervals 
and trading hours for options on Index-Linked Securities for another 
exchange.\11\ The Commission believes that the proposed changes to 
strike price intervals and trading hours for options on Index-Linked 
Securities do not raise any novel regulatory issues, and waiver of the 
operative delay should benefit investors by creating consistency and 
predictability for investors who may view these products as serving 
similar investment functions in the marketplace to ETFs. Therefore, the 
Commission designates the proposal operative upon filing.\12\
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    \11\ See Securities Exchange Act Release Nos. 61696 (March 12, 
2010), 75 FR 13174 (March 18, 2010) (SR-CBOE-2010-005); 61943 (April 
20, 2010), 75 FR 21689 (April 26, 2010) (SR-Phlx-2010-40).
    \12\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 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.

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-2010-37 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-2010-37. 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 Web site 
viewing and printing 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 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-2010-37 and should be submitted on or before June 7, 2010.

    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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-11651 Filed 5-14-10; 8:45 am]
BILLING CODE 8010-01-P