[Federal Register Volume 79, Number 132 (Thursday, July 10, 2014)]
[Notices]
[Pages 39442-39446]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-16096]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72537; File No. SR-NYSEArca-2014-25]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 1 and Order Granting Accelerated Approval of Proposed 
Rule Change, as Modified by Amendment No. 1, To Make Permanent Its 
Pilot Program Regarding Minimum Value Sizes for Opening Transactions in 
New Series of Flexible Exchange Options and Establish New Minimum Value 
Sizes Applicable to Other FLEX Transactions and FLEX Quotes

July 3, 2014.

I. Introduction

    On March 18, 2014, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to make permanent its pilot program regarding 
minimum value sizes for opening transactions in new series of flexible 
exchange options (``FLEX Options'' or ``FLEX'') and establish new 
minimum value sizes applicable to other FLEX transactions and FLEX 
Quotes. The proposed rule change was published for comment in the 
Federal Register on April 7, 2014.\3\ The Commission received no 
comments on the proposal. The Exchange consented to an extension of the 
time period for the Commission to approve the proposed rule change, 
disapprove the proposed rule change, or institute proceedings to 
determine whether the proposed rule change should be disapproved, to 
July 6, 2014. The Exchange filed Amendment No. 1 to the proposed rule 
change on May 22, 2014, in order to transmit a revised pilot report 
that replaces the original Exhibit 3 to the filing, and to correct an 
error in the Notice.\4\ The Commission is publishing this notice to 
solicit comments on Amendment No. 1 from interested persons and is 
approving the proposed rule change, as modified by Amendment No. 1, on 
an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 71839 (April 1, 
2014), 79 FR 19154 (``Notice'').
    \4\ The Exchange attached an Exhibit 3 to its proposed rule 
change that contained an annual report summarizing pilot data 
collected for the year 2013, the most recent complete year of the 
pilot program (``Pilot Report''). Specifically, the Pilot Report 
summarizes the trading volume and underlying value of opening 
transactions in new series of FLEX Options during the year 2013 with 
a size below the minimum value thresholds in force before the pilot, 
as well as the types of customers initiating such transactions. In 
Amendment No. 1, the Exchange submitted a revised Pilot Report as a 
new Exhibit 3 that replaces the original Exhibit 3 in its entirety. 
The revised Pilot Report corrects an error in the total FLEX Equity 
Option contract trading volume under the pilot reported in the 
original Pilot Report, and also makes non-substantive changes to 
certain descriptive language in the Pilot Report. In Amendment No. 1 
the Exchange also corrected the purpose section of the Notice to 
state that all FLEX Index Options are subject to the same Underlying 
Equivalent Value, and not unique Underlying Equivalent Values 
applicable to different types of FLEX Index Options as originally 
stated in the Notice.
---------------------------------------------------------------------------

II. Description of the Amended Proposal

    FLEX Options, unlike traditional standardized options, allow 
investors to customize basic option terms, including size, expiration 
date, exercise style, and certain exercise prices.\5\ Pursuant to 
Commentary .02 to Rule 5.32, the Exchange currently has in place a 
pilot program under which the minimum size requirements set forth in 
Rule 5.32(d)(2), which apply to opening transactions in new series of 
FLEX Options, are replaced with a one-contract minimum size (``Pilot 
Program'').\6\ Prior to the Pilot Program, pursuant to Rule 5.32(d)(2), 
the minimum value size for an opening transaction in any FLEX series in 
which there was no open interest at the time the request for quotes was 
submitted was: (i) For FLEX Equity Options, the lesser of 250 contracts 
or the number of contracts overlying $1 million in the underlying 
securities; and (ii) for FLEX Index Options, $10 million Underlying 
Equivalent Value.\7\ The Exchange's proposal will make the Pilot 
Program

[[Page 39443]]

permanent by eliminating the minimum value size requirements set forth 
in Rule 5.32(d)(2) for opening transactions in new FLEX Option series 
and by eliminating the Pilot Program rule text set forth in Commentary 
.02 to Rule 5.32. In connection with its proposal to make the Pilot 
Program permanent, and as required by its filing establishing the Pilot 
Program,\8\ the Exchange submitted to the Commission an annual Pilot 
Report summarizing Pilot Program data collected for year 2013, the most 
recent complete year of the Pilot Program.\9\
---------------------------------------------------------------------------

    \5\ See Notice, 79 FR 19155 n.4; see also NYSE Arca Options Rule 
(``Rule'') 5.32. FLEX Options can be FLEX Index Options or FLEX 
Equity Options. See Rules 5.30(b)(5) and (b)(6) (defining, 
respectively, the terms ``FLEX Equity Option'' and ``FLEX Index 
Option'').
    \6\ See Commentary .02 to Rule 5.32; see also Securities 
Exchange Act Release Nos. 62054 (May 6, 2010), 75 FR 27381 (May 14, 
2010) (SR-NYSEArca-2010-34) (establishing Pilot Program); and 71845 
(April 1, 2014) 79 FR 19143 (April 7, 2014) (SR-NYSEArca-2014-31) 
(extending Pilot Program until the earlier of July 31, 2014 or 
approval of the Pilot Program on a permanent basis).
    \7\ See Rule 5.32(d)(2); see also Rule 5.30(b)(17) (defining the 
term ``Underlying Equivalent Value'').
    \8\ See supra note 6.
    \9\ Specifically, the Pilot Report contains data and analysis of 
underlying equivalent values, open interest and trading volume, and 
analysis of the types of investors that initiated opening FLEX 
Equity and Index Options transactions (i.e., institutional, high net 
worth, or retail) in new FLEX Option series. See Amendment No. 1, 
supra note 4.
---------------------------------------------------------------------------

    In its filing, the Exchange also has proposed to make some other 
changes to its FLEX Option minimum value size rules, in addition to 
requesting that the Pilot Program be made permanent. Rules 5.32(d)(3)-
(4), which are not part of the Pilot Program, set forth minimum value 
sizes for other FLEX Option transactions and for FLEX Quotes. 
Specifically, pursuant to Rule 5.32(d)(3), for a transaction in any 
currently-opened FLEX series, the minimum value size is: (i) For FLEX 
Equity Options, the lesser of 100 contracts or the number of contracts 
overlying $1 million in the underlying securities in the case of 
opening transactions, and 25 contracts in the case of closing 
transactions; and (ii) for FLEX Index Options, $1 million Underlying 
Equivalent Value in the case of both opening and closing transactions; 
or (iii) for either case, the remaining underlying size or Underlying 
Equivalent Value on a closing transaction, whichever is less. Pursuant 
to Rule 5.32(d)(4), the minimum value size for FLEX Quotes responsive 
to a Request for Quotes is 25 contracts in the case of FLEX Equity 
Options and $1 million Underlying Equivalent Value in the case of FLEX 
Index Options or for either case the remaining underlying size or 
Underlying Equivalent Value on a closing transaction, whichever is 
less. Even though these minimum value size requirements set forth in 
Rules 5.32(d)(3)-(4) are not part of the Pilot Program, the Exchange 
has proposed to eliminate them as well, in conjunction with making the 
Pilot Program permanent. In its proposal the Exchange noted that 
adopting the same minimum value sizes for existing and new series, in 
addition to quotes, will allow market participants to tailor their FLEX 
Option transactions to meet their investment objectives.
    By proposing to make permanent the Pilot Program one-contract 
minimum for opening transactions in new series of FLEX Options and by 
also proposing to eliminate the minimum value size requirements for 
FLEX Option transactions in currently-opened series and FLEX Quotes 
responsive to a Request for Quotes, the Exchange is seeking to 
establish a one-contract minimum size for all FLEX Option transactions 
and FLEX Quotes. This one-contract minimum size would be codified in 
new Rule 5.32(b)(7). The Exchange states that its proposal for a one-
contract minimum value size for all FLEX Option transactions and FLEX 
Quotes is based on similar rules governing minimum value size for FLEX 
Options approved for the CBOE.\10\
---------------------------------------------------------------------------

    \10\ See Notice, 79 FR 19156 and n.13 (citing Securities 
Exchange Act Release No. 67624 (August 8, 2012), 77 FR 48580 (August 
14, 2012) (order approving CBOE's proposal to make permanent its 
pilot program eliminating minimum value sizes for FLEX Options)).
---------------------------------------------------------------------------

    In addition, as a technical, non-substantive change, the Exchange 
has proposed to relocate from current Rule 5.32(d)(1) to new Rule 
5.32(b)(6) rule text stating that the maximum term for both Equity and 
Index FLEX Options shall be fifteen years, and make other non-
substantive changes to the rule.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\11\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\12\ 
which requires, among other things, that the rules of a national 
securities exchange be 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 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest; and not be designed to permit unfair discrimination between 
customers, issuers, brokers or dealers.
---------------------------------------------------------------------------

    \11\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    FLEX Options were originally designed for use by institutional and 
high net worth customers, rather than retail investors.\13\ In 
approving CBOE's pilot eliminating minimum value sizes for FLEX 
Options, which was the first such pilot to go into effect, the 
Commission noted that it had received several comment letters stating 
that the proposal would assist institutional customers, but it also 
noted that the elimination of the minimum value size requirements 
raised the possibility that retail customers would access the FLEX 
Options market.\14\ One of the risks to retail investors outlined in 
the ODD \15\ is that, because of the customized nature of FLEX Options 
and lack of continuous quotes, trading in FLEX Options is often less 
deep and liquid than trading in standardized options on the same 
underlying interest.\16\ Additionally, the Commission observed that 
reducing the minimum value size for opening FLEX Option transactions 
increases the potential for the FLEX Options market to act as a 
surrogate for the standardized options market, and expressed concern in 
this regard because the standardized market contains certain 
protections for investors not present in the FLEX Options market.\17\ 
The Commission stated that, in the event CBOE proposed making its pilot 
program permanent, information regarding the types of

[[Page 39444]]

customers initiating opening FLEX Option transactions during the pilot 
would enable the Commission to evaluate how market participants have 
responded to CBOE's pilot program and what types of customers are using 
the FLEX Options market.\18\ For these same reasons, at the 
Commission's request, the Exchange included in its Pilot Report 
information regarding the types of customers that initiated opening 
FLEX Option transactions under its Pilot Program.\19\
---------------------------------------------------------------------------

    \13\ See Notice, 79 FR 19156; see also Securities Exchange Act 
Release No. 36841 (February 14, 1996), 61 FR 6666 (February 21, 
1996) (order approving SR-PSE-95-24). As noted in the Options 
Disclosure Document (``ODD''), which explains the characteristics 
and risks of exchange-traded options, flexibly structured options 
may be useful to sophisticated investors seeking to manage 
particular portfolio and trading risks. Rule 9b-1 under the Act 
requires that broker-dealers furnish the ODD to a customer before 
accepting an order from the customer to purchase or sell an option 
contract relating to an options class that is the subject of the 
ODD, or approving the customer's account for the trading of such 
option. See 17 CFR 240.9b-1(d).
    \14\ See Securities Exchange Act Release No. 61439 (January 28, 
2010), 75 FR 5831 (February 4, 2010) (order approving SR-CBOE-2009-
087) (``CBOE Pilot Approval Order'').
    \15\ See supra note 13.
    \16\ In particular, the ODD states that because many of the 
terms of FLEX Options are not standardized, it is less likely that 
there will be an active secondary market in which holders and 
writers of such options will be able to close out their positions by 
offsetting sales and purchases. Also, the ODD states that certain 
margin requirements for positions in flexibly structured options may 
be significantly greater than the margin requirements applicable to 
similar positions in other options on the same underlying interest.
    \17\ See CBOE Pilot Approval Order, supra note 14. In 
particular, the Commission noted that continuous quotes may not 
always be available in the FLEX Options market and that FLEX Options 
do not have trading rotations at either the opening or closing of 
trading. Id.
    \18\ Id. The Exchange has submitted a Pilot Report to the 
Commission as Exhibit 3 to its filing, as well as other, 
confidential reports of data collected during the Pilot Program. See 
Amendment No. 1, supra note 4.
    \19\ See Amendment No. 1, supra note 4.
---------------------------------------------------------------------------

    The Commission believes that these considerations and concerns that 
informed its analysis of whether to permanently approve CBOE's pilot 
are equally germane to its analysis here. As such, the Commission has 
carefully reviewed the Pilot Report that the Exchange provided to the 
Commission.\20\ The Pilot Report reflects that, in 2013, 84 opening 
transactions in new series of FLEX Equity Options were initiated on the 
Exchange with small minimum value sizes made possible by the Pilot 
Program, 83 of which were initiated by institutional customers.\21\ 
Moreover, the Pilot Report indicates that these 84 FLEX Equity Option 
transactions covered by the Pilot Program accounted for approximately 
1% of the total volume and approximately 3% of the total value of all 
opening FLEX Equity Option transactions in new series--i.e., opening 
transactions covered by the Pilot Program as well as opening 
transactions with value sizes above the pre-pilot minimum--during 2013.
---------------------------------------------------------------------------

    \20\ Id.
    \21\ Id. The Pilot Report indicates that there were no opening 
transactions in new series of FLEX Index Options during 2013 that 
were initiated below the pre-pilot minimum size requirement. The 
Pilot Report also indicates that no retail or high net worth 
customers initiated opening transactions on the Exchange in new 
series of FLEX Options below the pre-pilot minimum value size. The 
Exchange believes that the lack of participation in the Pilot 
Program by such customers is due to market structure issues, 
including but not limited to those surrounding customer priority, 
and is aware that retail customers initiate FLEX Option transactions 
at other market centers. Id.
---------------------------------------------------------------------------

    The Exchange notes that the Pilot Report includes data specific to 
opening transactions in new series of FLEX Options pursuant to current 
Rule 5.32(d)(2), and does not include data for transactions in 
currently-opened FLEX Options series or FLEX Quotes responsive to a 
request for quotes pursuant to Rules 5.32(d)(3)-(4), as such 
transactions and FLEX Quotes were not part of the Pilot Program.\22\ 
The Exchange represents, however, that based on its internal review, if 
Rules 5.32(d)(3)-(4) had been part of the Pilot Program, transactions 
in currently-opened FLEX Options series or FLEX Quotes with small value 
sizes made permissible by the Pilot Program would have been de minimis, 
and would not have materially altered the data in the Pilot Report.\23\
---------------------------------------------------------------------------

    \22\ See Notice, 79 FR 19157.
    \23\ Id.
---------------------------------------------------------------------------

    On balance, the Commission believes that it is consistent with the 
Act to make the Pilot Program permanent and thus eliminate, on a 
permanent basis, the minimum value size requirements set forth in Rule 
5.32(d)(2) for opening transactions in new series of FLEX Options. The 
protections noted below, including heightened options suitability 
requirements, should help to address any concerns about the potential 
for retail participation in the Exchange's FLEX Options market in the 
future. Moreover, the Commission is not aware of any data or analysis 
to date suggesting that the trading of FLEX Options has acted as a 
surrogate for the trading of standardized options on the Exchange as a 
result of the Pilot Program. Indeed, the Commission understands that 
FLEX Option trading accounts for less than 1% of the combined trading 
volume of the standardized and FLEX Option markets.\24\ In addition, 
the Pilot Report indicates that Pilot Program FLEX Option trades 
account for a very small proportion of the total volume and total value 
of all FLEX Option trades. Thus, it appears that the Pilot Program has 
not caused significant trading interest to migrate from the 
standardized options market to the FLEX Options market, nor caused, to 
the best of our knowledge, a large number of investors to use FLEX 
Options to avoid certain requirements in the standardized market. Based 
on the current data and size of the FLEX Options market, and the lack 
of any evidence to the contrary, it would appear that investors are 
using the FLEX Options market for its intended purpose--to be able to 
customize certain terms not available in the standardized options 
market.
---------------------------------------------------------------------------

    \24\ See email dated June 19, 2014 from Glenn H. Gsell, Managing 
Director, Intercontinental Exchange, NYSE Regulation, Inc. to 
Michael Bradley and David Michehl, Special Counsels, Division of 
Trading and Markets, Commission.
---------------------------------------------------------------------------

    The Commission also believes that a logical corollary to making the 
Pilot Program permanent is to eliminate the minimum value size 
requirements set forth in Rules 5.32(d)(3)-(4) for transactions in 
currently-opened FLEX Options series and FLEX Quotes responsive to a 
request for quotes. In this regard, the Commission notes that the 
Exchange does not believe that the difference between effecting a 
transaction in an existing FLEX Option series and effecting a FLEX 
transaction in a new series is material to the extent that there should 
be different minimum value sizes for the two types of transactions.\25\ 
In addition, the Exchange believes it would be consistent to apply the 
same minimum value size to closing transactions so that investors may 
elect to close just a portion of their FLEX position, without being 
subject to a minimum value size that may be greater than the equivalent 
value size necessary to meet their investment objectives.\26\ Further, 
the Exchange believes that it would be consistent to apply the same 
minimum value size to FLEX Quotes so that market participants may 
respond to a request for quotes with the precise number of contracts or 
underlying equivalent value needed to trade with the OTP Holder that 
submitted the request. The Commission finds no basis under the Act at 
this time for maintaining a minimum value size requirement for 
transactions in currently-opened FLEX Option series or FLEX Quotes 
responsive to a request for quotes, and believes that these changes 
should be approved for reasons similar to those supporting permanent 
approval of the Pilot Program. The Commission notes that it is not 
aware of any problems resulting from the permanent approval of CBOE's 
pilot eliminating FLEX Option minimum value sizes, which included 
currently-opened series and FLEX Quotes responsive to a request for 
quotes. As a result, the Commission believes that it is appropriate 
under the Act, and would promote just and equitable principles of 
trade, as well as remove impediments to and perfect the mechanism of a 
free and open market and a national market system, to replace the 
current minimum value size requirements for all FLEX Option 
transactions and FLEX Quotes on the Exchange with a one-contract 
minimum size.
---------------------------------------------------------------------------

    \25\ See Notice, 79 FR 19157.
    \26\ Id. Currently, the minimum value size for closing 
transactions is 25 contracts in the case of FLEX Equity Options and 
$1 million Underlying Equivalent Value in the case of FLEX Index 
Options, or in either case the remaining underlying size or 
Underlying Equivalent Value on a closing transaction, whichever is 
less. See Rules 5.32(d)(3)-(4).
---------------------------------------------------------------------------

    Existing safeguards--such as position reporting requirements and 
margin requirements--will continue to apply to

[[Page 39445]]

FLEX Options.\27\ Further, as noted above, under Rule 9b-1 under the 
Act,\28\ all customers of a broker-dealer with options accounts 
approved to trade FLEX Options must receive the ODD, which contains 
specific disclosures about the characteristics and special risks of 
trading FLEX Options.\29\ In addition, similar to other options, FLEX 
Options are subject to Trading Permit Holder supervision and 
suitability requirements, such as in Rules 9.2(b) and 9.18(c), 
respectively.\30\ In addition to ensuring that FLEX Options are 
suitable for their customers, broker-dealers also must take into 
account the characteristics of the FLEX market, as compared to the 
standardized market, when satisfying their best execution obligations. 
The Commission believes that the safeguards in place are reasonably 
designed to help mitigate potential risks for retail investors and 
other market participants investing in FLEX Options.
---------------------------------------------------------------------------

    \27\ Certain position limit, aggregation and exercise limit 
requirements continue to apply to FLEX Options in accordance with 
Rule 5.35 (Position Limits) and Rule 5.36 (Exercise Limits). But the 
Commission notes that certain FLEX Options do not have position or 
exercise limits.
    \28\ 17 CFR 240.9b-1.
    \29\ See supra notes 13 and 16.
    \30\ See Notice, 79 FR 19156.
---------------------------------------------------------------------------

    The Exchange believes that permanently removing the minimum value 
size requirements for FLEX Options will give investors a more viable, 
exchange-traded alternative to customized options in the OTC market, 
which are not subject to minimum value size requirements.\31\ 
Furthermore, the Exchange has represented that broker-dealers have 
indicated to the Exchange that the minimum value size requirements have 
prevented them from bringing transactions on the Exchange that are 
already taking place in the OTC market.\32\ Therefore, it appears 
possible that eliminating the minimum value sizes for all FLEX Options 
transactions and FLEX Quotes could further incent trading interest in 
customized options to move from the OTC market to the Exchange. To the 
extent investors choose to trade FLEX Options on the Exchange in lieu 
of the OTC market as a result of the permanent removal of the minimum 
value size requirements, such action should benefit investors. As the 
Commission has previously noted, there are certain benefits to trading 
on an exchange, such as enhanced efficiency in initiating and closing 
out positions, increased market transparency, and heightened contra-
party creditworthiness due to the role of the Options Clearing 
Corporation as issuer and guarantor of FLEX Options.\33\
---------------------------------------------------------------------------

    \31\ Id.
    \32\ Id.
    \33\ See Securities Exchange Act Release No. 57429 (March 4, 
2008), 73 FR 13058 (March 11, 2008) (order approving SR-CBOE-2006-
36).
---------------------------------------------------------------------------

IV. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment No. 1 
to 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 email to [email protected]. Please include 
File Number SR-NYSEArca-2014-25 on 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 SR-NYSEArca-2014-25. This 
file number should be included on the subject line if email 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 
10:00 a.m. and 3:00 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-2014-25 and should 
be submitted on or before July 31, 2014.

V. Accelerated Approval of Proposal, as Modified by Amendment No. 1

    In Amendment No. 1, the Exchange submitted a revised Pilot Report 
that corrects an error in the total FLEX Equity Option contract trading 
volume under the pilot reported in the original Pilot Report, and also 
makes non-substantive changes to certain descriptive language in the 
Pilot Report. The Commission believes that these corrections to the 
Pilot Report do not substantively alter the findings in the Pilot 
Report or diminish their support for approval of the pilot on a 
permanent basis. Amendment No. 1 also corrected the purpose section of 
the Notice to state that all FLEX Index Options are subject to the same 
Underlying Equivalent Value, and not unique Underlying Equivalent 
Values applicable to different types of FLEX Index Options as 
originally stated in the Notice. The Commission believes that this 
change in Amendment No. 1 is not substantive to the proposal. 
Accordingly, the Commission also finds good cause, pursuant to Section 
19(b)(2) of the Act,\34\ for approving the proposed rule change, as 
modified by Amendment No. 1, prior to the thirtieth day after the date 
of publication of notice in the Federal Register.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    In summary, the Commission believes, for the reasons noted above, 
that the proposed rule change to permanently approve the Pilot Program 
as well as remove the minimum size requirements for currently-opened 
FLEX Option series and FLEX Quotes, thereby permanently removing the 
minimum size requirements for all FLEX Options on the Exchange, is 
consistent with the Act and Section 6(b)(5) thereunder in particular, 
and should be approved, as amended. The Exchange has committed, and the 
Commission expects the Exchange, to continue to monitor the usage of 
FLEX Options, whether changes need to be made to its rules or the ODD 
to address any changes in retail FLEX Option participation, and for any 
other issues that may occur as a result of the elimination of the 
minimum value sizes on a permanent basis, including whether FLEX Option 
trades are being used as a surrogate for trading options in the 
standardized market.\35\
---------------------------------------------------------------------------

    \35\ See Notice, 79 FR 19157 (Exchange representing that it will 
continue to monitor the usage of FLEX Options and whether any 
changes to its rules or the ODD are necessary).

---------------------------------------------------------------------------

[[Page 39446]]

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\36\ that the proposed rule change (SR-NYSEArca-2014-25) be, and it 
hereby is, approved, on an accelerated basis, as amended.
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\37\
---------------------------------------------------------------------------

    \37\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014-16096 Filed 7-9-14; 8:45 am]
BILLING CODE 8011-01-P