[Federal Register Volume 80, Number 57 (Wednesday, March 25, 2015)]
[Notices]
[Pages 15838-15840]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-06718]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74541; File No. SR-NYSEARCA-2015-16]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Its Rules 
Governing the Short Term Option Series Program To Extend Current $0.50 
Strike Price Intervals in Non-Index Options to Short Term Options With 
Strike Prices Less Than $100

March 19, 2015.
    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 March 12, 2015, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') 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\ 15 U.S.C. 78a.
    \3\ 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 its rules governing the Short Term 
Option Series program to extend current $0.50 strike price intervals in 
non-index options to Short Term Options with strike prices less than 
$100. The text of the proposed rule change is available on the 
Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its rules governing the Short Term 
Option Series program (``STOS Program'') to introduce finer strike 
price intervals for certain short term options. In particular, the 
Exchange proposes to amend Commentary .07(e) to Rule 6.4 to extend 
current $0.50 strike price intervals in non-index options to short term 
options with strike prices less than $100 instead of the current $75. 
This proposed change is intended to eliminate gapped strikes between 
$75 and $100 that result from conflicting strike price parameters under 
the STOS and $2.50 Strike Price Programs as described in more detail 
below. The Exchange believes that the proposed rule change would 
increase market efficiency as it would align the Exchange's rules with 
recently approved changes to the rules governing short term options 
series programs of other options exchanges,\4\ which would enable the 
Exchange to compete equally and fairly with other options exchanges in 
satisfying strong customer demand to have the ability to execute 
hedging and trading strategies in finer strike price intervals.
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    \4\ See Securities and Exchange Act Release No. 73999 (January 
6, 2015), 80 FR 1599 [sic] (January 12, 2015) (SR-ISE-2014-52) 
(order granting approval of proposed rule change regarding short 
term option series program). Following approval of filing by the 
International Securities Exchange, LLC, several other option 
exchanges submitted ``copycat'' filings for immediate effectiveness. 
See, e.g., Securities and Exchange Act Release Nos. 74016 (January 
8, 2015), 80 FR 1976 (January 14, 2015) (SR-BOX-2015-01); 74144 
(January 27, 2015), 80 FR 5602 (February 2, 2015) (SR-CBOE-2015-09 
[sic]); 74145 (January 27, 2015), 80 FR 5600 (February 2, 2015) (SR-
Phlx-2015-09); 74146 (January 27, 2015), 80 FR 5595 (February 2, 
2015) (SR-NASDAQ-2015-005); 74147 (January 27, 2015), 80 FR 5604 
(February 2, 2015) (SR-BX-2015-006).
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    Pursuant to Commentary .07(b) to Rule 6.4, the Exchange may list 
short term options in up to fifty option classes, in addition to option 
classes that are selected by other securities exchanges that employ a 
similar program under their respective rules.\5\ For each of these 
option classes, the Exchange may list five short term option expiration 
dates at any given time, not counting monthly or quarterly 
expirations.\6\ Specifically, on any Thursday or Friday that is a 
business day, the Exchange currently may list short term options that 
expire at the close of business on each of the next five Fridays that 
are business days and are not Fridays in which monthly or quarterly 
options expire.\7\ These short term option series may be listed in 
strike price intervals of $0.50, $1, or $2.50, with the finer strike 
price intervals being offered for lower priced securities,\8\ and for 
options that trade in dollar increments in the related monthly 
expiration.\9\ More specifically, per current Commentary .07(e) to Rule 
6.4, the strike price interval for STOS may be $0.50 or greater for 
option classes that both trade in $1 strike price intervals and are in 
the STOS Program. If the class does not trade in $1 strike price 
intervals, the Exchange may list STOS in $0.50 intervals for strike 
prices less than $75; in $1 intervals for strike prices that are 
between $75 and $150; and in $2.50 intervals for strike prices greater 
than $150.10.\10\
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    \5\ The Exchange notes that the number of option classes that 
may participate in the STOS Program is aggregated between equity 
options and index options and is not apportioned between equity 
options and index options. For STOS Program rules regarding index 
options, see Rule 5.19; Rule 5.10(b)(24).
    \6\ See Commentary .07(a) to Rule 6.4.
    \7\ Id.
    \8\ See Commentary .07(e) to Rule 6.4.
    \9\ See Commentary .04 to Rule 6.4 (allows the Exchange to 
designate up to 150 options classes on individual stocks to be 
traded in $1 strike price intervals where the strike price is 
between $50 and $1).
    \10\ See Commentary .07(e) to Rule 6.4.
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    The Exchange also operates a $2.50 Strike Price Program that 
permits the Exchange to select up to sixty options classes on 
individual stocks to trade in $2.50 strike price intervals, in addition 
to option classes selected by other securities exchanges that employ a 
similar program under their respective rules.\11\ Monthly expiration 
options in classes admitted to the $2.50 Strike Price Program trade in 
$2.50 intervals where the strike price is (1) greater than $25 but less 
than $50; or (2) between $50 and $100 if the strikes are no more than 
$10 from the closing price of the underlying stock in its primary 
market on the preceding day.\12\ In certain instances, these strike 
price parameters conflict with strike prices allowed for short term 
options as dollar strikes between $75 and $100 otherwise allowed under 
the STOS Program may

[[Page 15839]]

be within $0.50 of strikes listed pursuant to the $2.50 Strike Price 
Program.
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    \11\ See Commentary .03 to Rule 6.4.
    \12\ Id. The term ``primary market'' is defined in Rule 6.1(7) 
[sic] as the principal market in which an underlying security is 
traded.
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    To remedy this conflict, the Exchange proposes to extend the $0.50 
strike price intervals, currently allowed for short term options with 
strike prices less than $75, to short term options with strike prices 
less than $100. With this proposed change, short term options in non-
index option classes would trade in: (1) $0.50 or greater intervals for 
strike prices less than $100, or for option classes that trade in one 
dollar increments in the related monthly expiration option; (2) $1 or 
greater intervals for strike prices that are between $100 and $150; and 
(3) $2.50 or greater intervals for strike prices above $150.\13\ The 
Exchange believes that this proposed change would eliminate gapped 
strikes between $75 and $100. The Exchange also believes that the 
proposed rule change would provide the investing public and other 
markets with additional opportunities to hedge their investments, thus 
allowing these investors to better manage their risk exposure. In 
addition, as noted above, the Exchange believes the proposed rule 
change would harmonize the Exchange's rules with recently approved 
rules on competing options exchanges, which consistency across markets 
would benefit investors.\14\
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    \13\ See proposed Commentary .07(e) to Rule 6.4.
    \14\ See supra n. 4.
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    With regard to the impact of this proposal on system capacity, the 
Exchange has analyzed its capacity and represents that it and the 
Options Price Reporting Authority (``OPRA'') have the necessary systems 
capacity to handle any potential additional traffic associated with 
this proposed rule change. The Exchange believes that its OTP Firms and 
OTP Holders would not have a capacity issue as a result of this 
proposal. The Exchange also represents that it does not believe this 
expansion would cause fragmentation of liquidity.
 2. Statutory Basis
    The Exchange believes that the proposed change is consistent with 
Section 6(b) of the Act,\15\ in general, and furthers the objectives of 
Section 6(b)(5),\16\ in particular, in that it is designed to promote 
just and equitable principles of trade, to remove impediments to, and 
perfect the mechanism of a free and open market and, in general, to 
protect investors and the public interest.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed change would result in a 
continuing benefit to investors by giving them more flexibility to 
closely tailor their investment and hedging decisions, thus allowing 
them to better manage their risk exposure. Under the Exchange's current 
rules, during the month prior to expiration, the Exchange is permitted 
to list related monthly option contracts in the narrower strike price 
intervals available for short term option series.\17\ After 
transitioning to short term strike price intervals, however, monthly 
options that trade in $2.50 intervals between $50 and $100 under the 
$2.50 Strike Price Program, trade with dollar strikes between $75 and 
$150. Due [sic] the overlap of $1 and $2.50 intervals, the Exchange 
cannot list certain dollar strikes between $75 and $100 that conflict 
with the prior $2.50 strikes. For example, if the Exchange initially 
listed monthly options on ABC with $75, $77.50, and $80 strikes, the 
Exchange could list the $76 and $79 strikes when these monthly options 
transition to short term intervals. The Exchange would not be permitted 
to list the $77 and $78 strikes, however, as these are $0.50 away from 
the $77.50 strike already listed on the Exchange. This creates gapped 
strikes between $75 and $100, where investors are not able to trade 
otherwise allowable dollar strikes on the Exchange.
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    \17\ See Commentary .07(e) to Rule 6.4 (regarding Related Non-
Short Term option series).
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    Similarly, these conflicting strike price parameters create issues 
for investors who want to roll their positions from monthly to weekly 
expirations. In the example above, for instance, an investor that 
purchased a monthly ABC option with a $77.50 strike price would not be 
able to roll that position into a later short term expiration with the 
same strike price as that strike is unavailable under current STOS 
Program rules. Thus, the Exchange believes that permitting $0.50 
intervals for short term options up to $100 would remedy both of these 
issues as strikes allowed under the $2.50 Strike Price Program would 
not conflict with the finer $0.50 strike price interval. The STOS 
Program has been well-received by market participants and the Exchange 
believes that introducing finer strike price intervals for short term 
options with strike prices between $75 and $100, and thereby 
eliminating the gapped strikes described above, would benefit these 
market participants by giving them more flexibility to closely tailor 
their investment and hedging decisions.
    With regard to the impact of this proposal on system capacity, the 
Exchange has analyzed its capacity and represents that it and the OPRA 
have the necessary systems capacity to handle any potential additional 
traffic associated with this proposed rule change. The Exchange 
believes that its OTP Firms and OTP Holders would not have a capacity 
issue as a result of this proposal. The Exchange also represents that 
it does not believe this expansion would cause fragmentation of 
liquidity.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that this proposed rule change would 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. To the contrary, the Exchange 
believes that the proposed rule change would result in additional 
investment options and opportunities to achieve the investment 
objectives of market participants seeking efficient trading and hedging 
vehicles, to the benefit of investors, market participants, and the 
marketplace in general. In addition, as noted above, the Exchange 
believes the proposed rule change is pro-competitive and would allow 
the Exchange to compete more effectively with other options exchanges 
that have already adopted changes to their short term option series 
programs that are substantially identical to the changes proposed by 
this filing.\18\
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    \18\ See supra n. 4.
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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 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 for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \19\ and Rule 19b-4(f)(6) 
thereunder.\20\
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.

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[[Page 15840]]

    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Exchange stated that waiver of this requirement will enable 
the Exchange to, as soon as possible, have the ability to compete with 
option exchanges that have incorporated the proposed rule change to 
their short term option series programs. For this reason, the 
Commission believes that the proposed rule change presents no novel 
issues and that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest. Therefore, the 
Commission designates the proposed rule change to be operative upon 
filing.\21\
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    \21\ For purposes only of waiving the 30-day operative delay, 
the Commission has also 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or 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 email to [email protected]. Please include 
File Number SR-NYSEARCA-2015-16 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-2015-16. 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-2015-16 and should 
be submitted on or before April 15, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-06718 Filed 3-24-15; 8:45 am]
 BILLING CODE 8011-01-P