Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to NYSE Arca Rule 6.72 and the Penny Pilot for Options Trading, 48717-48718 [E7-16759]

Download as PDF Federal Register / Vol. 72, No. 164 / Friday, August 24, 2007 / Notices places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56280; File No. SR– NYSEArca–2007–88] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to NYSE Arca Rule 6.72 and the Penny Pilot for Options Trading August 17, 2007. 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 August 16, 2007, the NYSE Arca, Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which items have been substantially prepared by NYSE Arca. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change NYSE Arca proposes to amend its options trading rules in order to extend the Penny Pilot in options classes in certain issues (‘‘Pilot Program’’) previously approved by the Commission through March 27, 2009.3 The Exchange also proposes to expand the Pilot Program in two phases: (1) The first phase will start on September 28, 2007 and continue through March 27, 2008 and will add 22 options classes, and (2) the second phase will start on March 28, 2008 and continue through March 27, 2009 and will add approximately 28 additional option classes. The text of the proposed rule change is available at https://www.nysearca.com, at the Exchange, and at the Commission’s Public Reference Room. yshivers on PROD1PC66 with NOTICES 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 Exchange 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 these statements may be examined at the 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release Nos. 55156 (January 23, 2007), 72 FR 4759 (February 1, 2007) (SR–NYSEArca–2006–73) and 56150 (July 26, 2007), 72 FR 42460 (August 2, 2007) (SR– NYSEArca–2007–56). 2 17 VerDate Aug<31>2005 14:35 Aug 23, 2007 Jkt 211001 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange hereby proposes to extend the time period of the Pilot Program 4 through March 27, 2009. The Exchange believes the benefits to public customers and other market participants who will be able to express their true prices to buy and sell options have been demonstrated to outweigh the increase in quote traffic. The Exchange also proposes to expand the Pilot Program in two phases. According to the proposal, the first phase will start on September 28, 2007 and continue through March 27, 2008 and will add 22 options classes. These 22 options classes are among the most actively traded, multiply listed options classes based on national average daily volume and, together with the existing 13 pilot classes, represent approximately 35% of the total industry volume. The 22 additional classes are: SPDR S&P 500 (SPY), Apple Inc. (AAPL), Altria Group (MO), Dendreon Corp. (DNDN), Amgen Inc. (AMGN), Yahoo! Inc. (YHOO), Qualcomm Inc. (QCOM), General Motors (GM), Energy Select Sector SPDR (XLE), Diamonds Trust (DIA), Oil Services HLDRS (OIH), NYSE Euronext (NYX), Cisco Systems (CSCO), Financial Select Sector SPDR (XLF), AT&T, Inc. (T), Citigroup, Inc. (C), Amazon.com Inc. (AMZN), Motorola Inc. (MOT), Research in Motion Ltd. (RIMM), Freeport-McMoRan Copper & Gold, Inc. (FCX), ConocoPhillips (COP), and Bristol-Myers Squibb Co. (BMY). Pursuant to the proposal, the second phase will start on March 28, 2008 and continue through March 27, 2009 and will add approximately 28 additional options classes. These 28 options classes will be among the most actively traded, multiply listed options classes based on national average daily volume, up to the top 50 by volume. This will bring the total number of options classes traded pursuant to the Pilot Program to 63 (12 from the original Pilot Program, 22 from phase one of the proposed expansion, and 28 from phase two of the proposed expansion).5 4 See supra, note 3. Exchange intends to submit a filing pursuant to Section 19(b)(3)(A) of the Act prior to the beginning of phase two, announcing the classes 5 The PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 48717 Aside from this expansion, all other aspects of the Pilot Program will remain the same. Specifically, for option contracts traded pursuant to the Pilot Program, the following minimum increments apply: (1) One cent ($0.01) for all options contracts in QQQQ (Nasdaq-100 Index Tracking Stock), (2) one cent ($0.01) for all options contracts that are trading at less than $3, and (3) five cents ($0.05) for all option contracts that are trading at or above $3. NYSE Arca represents that the Exchange has the necessary system capacity to support any additional series listed as part of the Pilot Program. The Exchange agrees to submit written reports to the Commission that include data and written analysis of information collected during the course of the Pilot Program. The Exchange intends to submit four reports within 30 days of the end of each of the following report periods: (i) May 1, 2007 through September 27, 2007, (ii) September 28, 2007 through January 31, 2008, (iii) February 1, 2008 through July 31, 2008, and (iv) August 1, 2008 through January 31, 2009. These reports will include, but will not be limited to, data and analysis concerning the economic and capacity impact of the Pilot Program. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,6 in general, and furthers the objectives of Section 6(b)(5) of the Act,7 in particular, in that the proposed rule change is 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 facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. to be added to the Pilot Program. Pursuant to NYSE Arca Rule 6.72, the pilot issues will also be announced to the Exchange’s membership via Regulatory Bulletin and published by the Exchange on its Web site. 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(5). E:\FR\FM\24AUN1.SGM 24AUN1 48718 Federal Register / Vol. 72, No. 164 / Friday, August 24, 2007 / Notices • If a determination is made that an option should be removed from the Penny Pilot, how much notice should be given to market participants that the quoting increment will change? C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments on the proposed rule change were neither solicited nor received. Comments may be submitted by any of the following methods: yshivers on PROD1PC66 with NOTICES III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will: (A) By order approve such proposed rule change, or (B) Institute proceedings to determine whether the proposed rule change should be 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. The Commission also requests and encourages interested persons to submit comments on the following specific questions: • Whether there are circumstances under which options classes included in the Penny Pilot should be removed from the Pilot? • If so, what factors should be considered in making the determination to remove an option class from the Penny Pilot? Æ Should an objective standard be used? For instance, should an option class come out of the Penny Pilot if its trading volume drops below a threshold amount? If so, what should that threshold be? Or, should an option class come out of the Penny Pilot if it is no longer among the most actively-traded options? If so, what should be considered the most-actively traded options? What statistics or analysis should be used to support a determination to remove an options class? Æ Should a more subjective analysis be allowed? If so, what factors should be taken into account? • What concerns might arise by removing an option from the Penny Pilot? How could such concerns be ameliorated? • How frequently should the analysis be undertaken (e.g., annually, biannually, quarterly), or should the evaluation be an automated process? VerDate Aug<31>2005 14:35 Aug 23, 2007 Jkt 211001 Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NYSEArca–2007–88 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.8 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–16759 Filed 8–23–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56272; File No. SR–Phlx– 2007–57] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Trading Sessions on XLE August 16, 2007. 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 August 3, All submissions should refer to File 2007, the Philadelphia Stock Exchange, Number SR–NYSEArca–2007–88. This Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with file number should be included on the the Securities and Exchange subject line if e-mail is used. To help the Commission (‘‘Commission’’) the Commission process and review your proposed rule change as described in Items I and II below, which Items have comments more efficiently, please use only one method. The Commission will been substantially prepared by the post all comments on the Commission’s Exchange. The Exchange filed the proposed rule change pursuant to Internet Web site (https://www.sec.gov/ Section 19(b)(3)(A) of the Act 3 and Rule rules/sro.shtml). Copies of the 19b–4(f)(6) thereunder,4 which renders submission, all subsequent the proposed rule change effective upon amendments, all written statements filing with the Commission. The with respect to the proposed rule Commission is publishing this notice to change that are filed with the solicit comments on the proposed rule Commission, and all written change from interested persons. communications relating to the proposed rule change between the I. Self-Regulatory Organization’s Commission and any person, other than Statement of the Terms of Substance of the Proposed Rule Change those that may be withheld from the public in accordance with the The Exchange proposes to amend provisions of 5 U.S.C. 552, will be Phlx Rule 101, Supplementary Material available for inspection and copying in .02 to provide for securities that trade in the Commission’s Public Reference one or two, but not all three, trading Room, 100 F Street, NE., Washington, sessions on XLE.5 In addition, the DC 20549, on official business days Exchange would amend the rule to between the hours of 10 a.m. and 3 p.m. require the Exchange to maintain on its Internet Web site information regarding Copies of such filing also will be securities that do not trade in all three available for inspection and copying at the principal office of the Exchange. All 8 17 CFR 200.30–3(a)(12). comments received will be posted 1 15 U.S.C. 78s(b)(1). without change; the Commission does 2 17 CFR 240.19b–4. not edit personal identifying 3 15 U.S.C. 78s(b)(3)(A). information from submissions. You 4 17 CFR 240.19b–4(f)(6). 5 Phlx Rule 101 Supplementary Material .02(1)– should submit only information that you wish to make available publicly. All (3) describes XLE’s three trading sessions. The Pre Market Session begins at 8 a.m. Eastern Time submissions should refer to File (‘‘ET’’) and concludes at the commencement of the Number SR–NYSEArca–2007–88 and Core Session. The Core Session begins at 9:30 a.m. (ET) and concludes at 4 p.m. (ET), provided that for should be submitted on or before specified exchange-traded funds, the Core Session September 14, 2007. PO 00000 concludes at 4:15 p.m. (ET). The Post Market Session begins following the conclusion of the Core Session and concludes at 6 p.m. (ET). Frm 00110 Fmt 4703 Sfmt 4703 E:\FR\FM\24AUN1.SGM 24AUN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 72, Number 164 (Friday, August 24, 2007)]
[Notices]
[Pages 48717-48718]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-16759]



[[Page 48717]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56280; File No. SR-NYSEArca-2007-88]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to NYSE Arca Rule 6.72 and the Penny 
Pilot for Options Trading

August 17, 2007.
    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 August 16, 2007, the NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
items have been substantially prepared by NYSE Arca. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NYSE Arca proposes to amend its options trading rules in order to 
extend the Penny Pilot in options classes in certain issues (``Pilot 
Program'') previously approved by the Commission through March 27, 
2009.\3\ The Exchange also proposes to expand the Pilot Program in two 
phases: (1) The first phase will start on September 28, 2007 and 
continue through March 27, 2008 and will add 22 options classes, and 
(2) the second phase will start on March 28, 2008 and continue through 
March 27, 2009 and will add approximately 28 additional option classes. 
The text of the proposed rule change is available at https://
www.nysearca.com, at the Exchange, and at the Commission's Public 
Reference Room.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release Nos. 55156 (January 23, 
2007), 72 FR 4759 (February 1, 2007) (SR-NYSEArca-2006-73) and 56150 
(July 26, 2007), 72 FR 42460 (August 2, 2007) (SR-NYSEArca-2007-56).
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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 Exchange 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 these 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 aspects 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 hereby proposes to extend the time period of the Pilot 
Program \4\ through March 27, 2009. The Exchange believes the benefits 
to public customers and other market participants who will be able to 
express their true prices to buy and sell options have been 
demonstrated to outweigh the increase in quote traffic.
---------------------------------------------------------------------------

    \4\ See supra, note 3.
---------------------------------------------------------------------------

    The Exchange also proposes to expand the Pilot Program in two 
phases. According to the proposal, the first phase will start on 
September 28, 2007 and continue through March 27, 2008 and will add 22 
options classes. These 22 options classes are among the most actively 
traded, multiply listed options classes based on national average daily 
volume and, together with the existing 13 pilot classes, represent 
approximately 35% of the total industry volume.
    The 22 additional classes are: SPDR S&P 500 (SPY), Apple Inc. 
(AAPL), Altria Group (MO), Dendreon Corp. (DNDN), Amgen Inc. (AMGN), 
Yahoo! Inc. (YHOO), Qualcomm Inc. (QCOM), General Motors (GM), Energy 
Select Sector SPDR (XLE), Diamonds Trust (DIA), Oil Services HLDRS 
(OIH), NYSE Euronext (NYX), Cisco Systems (CSCO), Financial Select 
Sector SPDR (XLF), AT&T, Inc. (T), Citigroup, Inc. (C), Amazon.com Inc. 
(AMZN), Motorola Inc. (MOT), Research in Motion Ltd. (RIMM), Freeport-
McMoRan Copper & Gold, Inc. (FCX), ConocoPhillips (COP), and Bristol-
Myers Squibb Co. (BMY).
    Pursuant to the proposal, the second phase will start on March 28, 
2008 and continue through March 27, 2009 and will add approximately 28 
additional options classes. These 28 options classes will be among the 
most actively traded, multiply listed options classes based on national 
average daily volume, up to the top 50 by volume. This will bring the 
total number of options classes traded pursuant to the Pilot Program to 
63 (12 from the original Pilot Program, 22 from phase one of the 
proposed expansion, and 28 from phase two of the proposed 
expansion).\5\
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    \5\ The Exchange intends to submit a filing pursuant to Section 
19(b)(3)(A) of the Act prior to the beginning of phase two, 
announcing the classes to be added to the Pilot Program. Pursuant to 
NYSE Arca Rule 6.72, the pilot issues will also be announced to the 
Exchange's membership via Regulatory Bulletin and published by the 
Exchange on its Web site.
---------------------------------------------------------------------------

    Aside from this expansion, all other aspects of the Pilot Program 
will remain the same. Specifically, for option contracts traded 
pursuant to the Pilot Program, the following minimum increments apply: 
(1) One cent ($0.01) for all options contracts in QQQQ (Nasdaq-100 
Index Tracking Stock), (2) one cent ($0.01) for all options contracts 
that are trading at less than $3, and (3) five cents ($0.05) for all 
option contracts that are trading at or above $3. NYSE Arca represents 
that the Exchange has the necessary system capacity to support any 
additional series listed as part of the Pilot Program.
    The Exchange agrees to submit written reports to the Commission 
that include data and written analysis of information collected during 
the course of the Pilot Program. The Exchange intends to submit four 
reports within 30 days of the end of each of the following report 
periods: (i) May 1, 2007 through September 27, 2007, (ii) September 28, 
2007 through January 31, 2008, (iii) February 1, 2008 through July 31, 
2008, and (iv) August 1, 2008 through January 31, 2009. These reports 
will include, but will not be limited to, data and analysis concerning 
the economic and capacity impact of the Pilot Program.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\7\ in particular, in that the 
proposed rule change is 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 
facilitating transactions in securities, and to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.

[[Page 48718]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be 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. The Commission also requests and 
encourages interested persons to submit comments on the following 
specific questions:
     Whether there are circumstances under which options 
classes included in the Penny Pilot should be removed from the Pilot?
     If so, what factors should be considered in making the 
determination to remove an option class from the Penny Pilot?
    [cir] Should an objective standard be used? For instance, should an 
option class come out of the Penny Pilot if its trading volume drops 
below a threshold amount? If so, what should that threshold be? Or, 
should an option class come out of the Penny Pilot if it is no longer 
among the most actively-traded options? If so, what should be 
considered the most-actively traded options? What statistics or 
analysis should be used to support a determination to remove an options 
class?
    [cir] Should a more subjective analysis be allowed? If so, what 
factors should be taken into account?
     What concerns might arise by removing an option from the 
Penny Pilot? How could such concerns be ameliorated?
     How frequently should the analysis be undertaken (e.g., 
annually, bi-annually, quarterly), or should the evaluation be an 
automated process?
     If a determination is made that an option should be 
removed from the Penny Pilot, how much notice should be given to market 
participants that the quoting increment will change?

Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2007-88 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

    All submissions should refer to File Number SR-NYSEArca-2007-88. 
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 (https://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 inspection 
and copying 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-2007-88 and should 
be submitted on or before September 14, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-16759 Filed 8-23-07; 8:45 am]
BILLING CODE 8010-01-P

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