[Federal Register Volume 75, Number 239 (Tuesday, December 14, 2010)]
[Notices]
[Pages 77932-77934]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-31290]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63475; File No. SR-NYSEAMEX-2010-114]


Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Reestablishing a 
Pilot Program Relating to Cabinet Trades Until June 1, 2011

December 8, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\

[[Page 77933]]

notice is hereby given that on December 2, 2010, NYSE Amex LLC 
(``Exchange'' or ``NYSE Amex'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
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 establish and extend its program that 
allows transactions to take place at a price that is below $1 per 
option contract until June 1, 201 [sic]. The text of the proposed rule 
change is available at the Exchange, the Commission's Public Reference 
Room, and http://www.nyse.com.

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 re-establish the Pilot Program \3\ 
under Rule 968NY to allow accommodation transactions (``Cabinet 
Trades'') to take place at a price that is below $1 per option 
contract, and to extend the program to June 1, 2011. The Exchange 
proposes to extend the program to the same date as The Chicago Board 
Options Exchange (``CBOE'').\4\ The Pilot Program expired on July 1, 
2010.
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    \3\ See Securities Exchange Act Release No. 61726 (March 17, 
2010), 75 FR 14234 (March 24, 2010) (SR-NYSE Amex-2010-21).
    \4\ See Securities Exchange Act Release No. 62192 (May 28, 
2010), 75 FR 31828 (June 4, 2010) (SR-CBOE-2010-052).
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    An ``accommodation'' or ``cabinet'' trade refers to trades in 
listed options on the Exchange that are worthless or not actively 
traded. Cabinet trading is generally conducted in accordance with the 
Exchange Rules, except as provided in Exchange Rule 968NY Cabinet 
Trades (Accommodation Transactions), which sets forth specific 
procedures for engaging in cabinet trades. Rule 968NY currently 
provides for cabinet transactions to occur via open outcry at a cabinet 
price of a $1 per option contract in any options series open for 
trading in the Exchange, except that the Rule is not applicable to 
trading in option classes participating in the Penny Pilot Program. 
Under the procedures, bids and offers (whether opening or closing a 
position) at a price of $1 per option contract may be represented in 
the trading crowd by a Floor Broker or by a Market-Maker or provided in 
response to a request by a Trading Official, a Floor Broker or a 
Market-Maker, but must yield priority to all resting orders in the 
Cabinet (those orders held by the Trading Official, and which resting 
cabinet orders may be closing only). So long as both the buyer and the 
seller yield to orders resting in the cabinet book, opening cabinet 
bids can trade with opening cabinet offers at $1 per option contract.
    The Exchange temporarily amended the procedures through July 1, 
2010 to allow transactions to take place in open outcry at a price of 
at least $0 but less than $1 per option contract. These lower priced 
transactions were permitted to be traded pursuant to the same 
procedures applicable to $1 cabinet trades, except that (i) bids and 
offers for opening transactions were only permitted to accommodate 
closing transactions in order to limit use of the procedure to 
liquidations of existing positions, and (ii) the procedures were also 
made available for trading in option classes participating in the Penny 
Pilot Program.\5\ The Exchange believed (and continues to believe) that 
allowing a price of at least $0 but less than $1 would better 
accommodate the closing of options positions in series that were 
worthless or not actively traded, particularly due to recent market 
conditions which had resulted in a significant number of series being 
out-of-the-money. For example, a market participant might have a long 
position in a call series with a strike price of $100 and the 
underlying stock might be trading at $30. In such an instance, there 
might not otherwise be a market for that person to close-out the 
position even at the $1 cabinet price (e.g., the series might be quoted 
no bid).
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    \5\ Currently the $1 cabinet trading procedures are limited to 
options classes traded in $0.05 or $0.10 standard increment. The $1 
cabinet trading procedures are not available in Penny Pilot Program 
classes because in those classes an option series can trade in a 
standard increment as low as $0.01 per share (or $1.00 per option 
contract with a 100 share multiplier). Because the instant rule 
change would allow trading below $0.01 per share (or $1.00 per 
option contract with a 100 share multiplier), the procedures would 
be made available for all classes, including those classes 
participating in the Penny Pilot Program.
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    As with other accommodation liquidations under Rule 968NY, 
transactions that occur for less than $1 will not be disseminated to 
the public on the consolidated tape. In addition, as with other 
accommodation liquidations under Rule 968NY, the transactions will be 
exempt from the Consolidated Options Audit Trail (``COATS'') 
requirements of Exchange Rule 955NY. Order Format and System Entry 
Requirements. However, the Exchange will maintain quotation, order and 
transaction information for the transactions in the same format as the 
COATS data is maintained. In this regard, all transactions for less 
than $1 must be reported to the Exchange following the close of each 
business day.
    The Pilot Program lapsed on July 1, 2010. The Exchange is proposing 
to reinstate the Program at this time to be in place for end-of-year 
liquidations. During the period from July 1 to date, no sub-penny 
cabinet trades were executed on the Exchange.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) \6\ of the Securities Exchange Act of 1934 (the ``Act''), 
in general, and furthers the objectives of Section 6(b)(5) \7\ 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 allowing 
for liquidations at a price less than $1 per option contract will 
better facilitate the closing of options positions that are worthless 
or not actively trading, especially in Penny Pilot issues where Cabinet 
Trades are not otherwise permitted.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 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.

[[Page 77934]]

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 foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) thereunder \9\ because 
the proposal does not: (i) Significantly affect the protection of 
investors or the public interest; (ii) impose any significant burden on 
competition; and (iii) by its terms, 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.\10\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ In addition, Rule 19b-4(f)(6) provides that the Exchange 
must provide the Commission 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 requested that the Commission waive the 30-day 
operative delay period. The Commission hereby grants the request. The 
Commission notes that the proposal is nearly identical to the rules of 
another exchange.\11\ Therefore, the Commission believes it is 
consistent with the protection of investors and the public interest to 
waive the 30-day operative delay and designates the proposal as 
operative upon filing.\12\
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    \11\ See CBOE Rule 6.54, Interpretations and Policies .03.
    \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 summarily may temporarily suspend 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.\13\
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    \13\ 15 U.S.C. 78s(b)(3)(C).
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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-NYSEAmex-2010-114 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-NYSEAmex-2010-114. 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-
NYSEAmex-2010-114 and should be submitted on or before January 4, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-31290 Filed 12-13-10; 8:45 am]
BILLING CODE 8011-01-P