[Federal Register Volume 75, Number 125 (Wednesday, June 30, 2010)]
[Notices]
[Pages 37868-37870]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-15824]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62369; File No. SR-NYSEArca-2010-59]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change by NYSE Arca To Expand and 
Permanently Establish Its Short Term Option Program

June 23, 2010.
    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 17, 2010, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by NYSE Arca. 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 amend Rule 5.10(b), Rule 5.19, and Rule 
6.4 Commentary .07 so as to rename, make changes to, and make permanent 
the One Week Option Series Pilot Program. The text of the proposed rule 
change is attached as Exhibit 5 to the 19b-4 form. A copy of this 
filing is available on the Exchange's Web site at http://www.nyse.com, 
at the Exchange's principal office, on the Commission's Web site at 
http://www.sec.gov, 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 this filing is to amend Rule 6.4 Commentary .07 to 
increase the number of One Week Options Series in an underlying class 
from five to twenty. The proposed change is based on an approved rule 
of the Chicago Board Options Exchange, Inc. (``CBOE''). The Exchange is 
proposing to adopt the Pilot Program on a permanent basis. In addition, 
the Exchange is amending the name of the Pilot to be the Short Term 
Options Series Program and proposing, by amending Rule 5.19, certain 
non-substantive changes to reorganize its rule text related to Short 
Term Option Series so that applicable terms are located within a single 
section of the relevant rules. The Exchange is also amending Rule 6.4 
to allow the Short Term Option Opening Date to be either a Thursday or 
Friday (or, if the Exchange is not open for business on the respective 
Thursday or Friday, the first business day immediately prior to that 
respective Thursday or Friday), based on a rule change adopted by the 
CBOE.\3\
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    \3\ See Exchange Act Release No. 62170, (May 25, 2010) 75 FR 
30889 (June 2, 2010) (SR-CBOE-2010-048).
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    On July 12, 2005, the Securities and Exchange Commission 
(``Commission'') approved the Pilot Program.\4\ The Pilot Program 
allows NYSE Arca to list and trade One Week Option Series, which would 
expire one week after the date on which a series is opened. Under the 
Pilot Program, NYSE Arca can select up to five approved option classes 
on which One Week Option Series could be opened.
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    \4\ See Exchange Act Release No. 52013, (July 12, 2005) 70 FR 
41471 (July 19, 2005). The Pilot has been extended each year. See 
Exchange Act Release No. 54052 (June 27, 2006) 71 FR 38679 (July 7, 
2006); Exchange Act Release No. 56048 (July 11, 2007) 72 FR 39653 
(July 19, 2007); Exchange Act Release No. 58085, (July 2, 2008) 73 
FR 39767 (July 10, 2008); Exchange Act Release No. 60285 (July 10, 
2009) 74 FR 34816 (July 17, 2009).
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    If selected for the Pilot Program, the Exchange may open up to five 
One Week Option Series for each expiration date in that class. The 
strike price of each One Week Option Series are fixed at a price per 
share, with approximately the same number of strike prices above and 
below the value of the underlying security or calculated index value at 
about the time that the One Week Option Series is opened.
    The Exchange proposes to adopt the Pilot Program on a permanent 
basis. The current Pilot expires on July 12, 2010.
    While NYSE Arca did not list any Short Term Option Series during 
most of the Pilot Period, it did recently list Short Term Options 
Series in multiply listed issues selected by NYSE Amex LLC (``NYSE 
Amex'').\5\ There has been continued investor interest in trading 
short-term options at the Chicago Board Options Exchange (``CBOE''), 
and significant investor interest in Short Term Options Series in the 
four issues selected by NYSE Amex. The CBOE adopted their Pilot Program 
on a permanent basis after four years of trading ``weeklys'' on four 
index products, and found no operational or capacity related 
problems.\6\ In order to remain competitive in listing Short Term 
Option Series in multiply listed classes, and to have the ability to 
respond to customer interests if warranted, the Exchange proposes to 
adopt its Pilot Program on a permanent basis.
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    \5\ On June 3, 2010, NYSE Amex listed Short Term Options Series 
expiring June 11, 2010 in NASDAQ 100 Tracking Stock (QQQQ); SPDR S&P 
500 ETF (SPY); iShares Russell 2000 Index Fund (IWM); and DIAMONDS 
Trust (DIA).
    \6\ See Securities Exchange Act Release No. 59824 (April 27, 
2009), 74 FR 20518 (May 4, 2009) (SR-CBOE-2009-018).
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    In the original proposal to establish the Pilot Program the 
Exchange stated that if it were to propose an extension or an expansion 
of the program, the Exchange would submit, along with any filing 
proposing such amendments to the program, a Pilot Program report 
(``Report''). The Report would provide an analysis of the Pilot Program 
covering the entire period during which the Pilot Program was in 
effect. Since the Exchange did not have any Short Term Options Series 
listed as part of the Pilot Program until very recently, there is no 
data available to compile such a report at this time. Therefore there 
is no Report associated with the program included with this proposal to 
adopt the Program on a permanent basis. NYSE Arca does commit to 
providing a Report on Short

[[Page 37869]]

Term Option Series to the Commission no later than May 31, 2011, 
covering the period from June 3, 2010 through March 31, 2011.
    To reduce investor confusion, the Exchange is proposing to rename 
the Pilot Program as the Short Term Options Series Program, consistent 
with other markets that have similar programs.
    NYSE Arca is proposing to modify the terms of the Pilot Program to 
provide that up to twenty (as opposed to five) Short Term Option Series 
may be opened for each expiration date. The Exchange believes this 
increase in the number of series will provide investors with greater 
flexibility in the trading of Short Term Option Series by allowing 
investors to establish options positions that are better tailored to 
meet their investment objectives. NYSE Arca also believes that allowing 
for the increased number of series would allow us to better maintain an 
orderly market, meet customer demand and respond in scenarios when the 
market price of the underlying moves substantially from the exercise 
price or prices of the series already opened, which we anticipate will 
occur as evidenced with the recent volatility in the market.
    Consistent with the existing Pilot Program provisions: (i) 
Approximately the same number of strike prices would be opened above 
and below the value of the underlying security or calculated index 
value at about the time the Short Term Option Series are initially 
opened for trading; (ii) if the Exchange has opened less than twenty 
Short Term Option Series for a given expiration date, additional series 
may be opened for trading on the Exchange when the Exchange deems it 
necessary to maintain an orderly market, to meet customer demand or 
when the current value of the underlying security or index moves 
substantially from the exercise price or prices of the series already 
opened; and (iii) in any event, the total number of series for a given 
expiration date will not exceed twenty series.
    The Exchange is also changing the Pilot Program rules to include a 
condition that any strike prices initially listed by the Exchange shall 
be within thirty percent (30%) above or below the closing price of the 
underlying security on the preceding day or the current value of the 
underlying index, as applicable. Any additional strike prices listed by 
the Exchange shall be within thirty percent (30%) above or below the 
current price of the underlying security or current value of the 
underlying index, as applicable. Under the rule change, the Exchange 
may also open additional strike prices of Short Term Option Series that 
are more than 30% above or below the current price of the underlying 
security or current value of the underlying index, as applicable, 
provided that demonstrated customer interest exists for such series, as 
expressed by institutional, corporate or individual customers or their 
brokers. Market-Makers trading for their own account shall not be 
considered when determining customer interest under this provision. The 
opening of the new Short Term Option Series shall not affect the series 
of options of the same class previously opened. The Exchange believes 
there is sufficient investor interest and demand to increase the number 
of series.
    The Exchange is also proposing to allow Short Term Options Series 
to be opened on any Thursday (or Friday) that expire on the Friday of 
the following business week, similar to a recently adopted rule change 
of the CBOE.\7\ This will provide market participants an opportunity to 
``roll'' expiring positions; that is, trade out of an expiring Short 
Term Option Series and re-establish a new position in the Short Term 
Option Series expiring one week later. Since the last trading day for 
A.M.-settled Short Term Option Series on indexes is generally a 
Thursday, and new A.M.-settled Short Term Options Series on indexes are 
generally listed on Friday, new and expiring A.M.-settled Short Term 
Options Series are never available concurrently.
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    \7\ See Exchange Act Release No. 62170 (May 25, 2010) 75 FR 
30889 (June 2, 2010).
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    As a result, it is impossible to implement a position roll in A.M.-
settled Short Term Options on indexes. The Exchange has been advised 
that opening A.M.-settled Short Term Options on indexes just one day 
earlier, and providing an opportunity to roll, would enhance the value 
of A.M.-settled Short Term Options on indexes as a risk management 
tool.
    In order to avoid investor confusion, the Exchange is proposing to 
permit the listing of all Short Term Option series (equity and index) 
on any Thursday or Friday. As proposed, the rule changes give the 
Exchange the flexibility to list Short Term Option series on any 
Thursday or Friday, and do not restrict listing to a particular day.
    The Exchange believes that the Program provides investors with 
additional means of managing their risk exposures and carrying out 
their investment objectives. The Exchange also represents that is has 
the necessary system capacity to support the option series listed under 
the Program and the proposed increase in number of series.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) \8\ of the Securities Exchange Act of 1934 (the ``Act''), 
in general, and furthers the objectives of Section 6(b)(5) \9\ 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 to perfect the mechanism for a free and open 
market and a national market system and, in general, to protect 
investors and the public interest. The Exchange believes that 
increasing the number of available strikes in One Week Options Series 
will provide investors with additional means of managing their risk and 
carrying out their investment objectives.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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)(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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[[Page 37870]]

    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiver of the operative 
delay is consistent with the protection of investors and the public 
interest because the proposal is substantially similar to that of 
another exchange that was approved by the Commission.\14\ Therefore, 
the Commission designates the proposal operative upon filing.\15\
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    \14\ See Securities Exchange Act Release No. 59824 (April 27, 
2009), 74 FR 20518 (May 4, 2009) (SR-CBOE-2009-018).
    \15\ 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).
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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-2010-59 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-2010-59. 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 the 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-2010-59 and should be submitted on or before July 21, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-15824 Filed 6-29-10; 8:45 am]
BILLING CODE 8011-01-P