Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rules Pertaining to the Terms of Index Option Contracts, 8387-8389 [E8-2611]
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Federal Register / Vol. 73, No. 30 / Wednesday, February 13, 2008 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57291; File No. SR–NYSE–
2007–113]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Order
Approving Proposed Rule Change To
Amend Annual Fees Applicable to
Groups of Real Estate Investment
Trusts Under Common External
Management
February 7, 2008.
I. Introduction
On December 20, 2007, the New York
Stock Exchange LLC (‘‘NYSE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to section
19(b)(1) of the Securities Exchange Act
of 1934 (the ‘‘Act’’),1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend Annual Fees applicable to
groups of Real Estate Investment Trusts
(‘‘REITs’’) under common external
management. The proposed rule change
was published for comment in the
Federal Register on January 4, 2008.3
The Commission received no comments
on the proposal. This order approves the
proposed rule change.
rwilkins on PROD1PC63 with NOTICES
II. Description of the Proposal
The Exchange proposes to amend
section 902 of the Listed Company
Manual by inserting proposed new
section 902.03A. In its filing, the
Exchange stated that in a limited
number of cases, a single entity or
affiliated entities may externally manage
more than one REIT. As an incentive for
all of the REITs in such a group to list
on the Exchange, the Exchange is
proposing to offer a group discount on
Annual Fees when there are at least
three REITs under common external
management.
REITs will continue to be subject to
the Annual Fees applicable to listed
equity securities as set forth in section
902.03. However, section 902.03A will
provide that, where all of the operations
of each of a group of three or more listed
REITs are externally managed by the
same entity or by affiliated entities, each
REIT in the group will receive a 30%
discount on the applicable Annual Fees
in relation to any year in which the
common management relationship
exists as of January 1. A newly-listed
REIT that qualifies for the discount will
receive it in relation to the part of the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 57061
(December 28, 2007), 73 FR 0902.
2 17
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17:45 Feb 12, 2008
Jkt 214001
year for which it pays a prorated Annual
Fee upon initial listing. For example, a
REIT that lists on July 1 and whose
outstanding number of shares would
subject it to a $100,000 Annual Fee
would normally pay a prorated amount
of $50,000 because it would be listed for
exactly half of the first year of listing.
If that REIT qualifies for the group
discount, it would pay $35,000 (70% of
the prorated Annual Fee that would
otherwise be payable). This filing seeks
approval to apply the discount
retroactively to January 1, 2008.
III. Discussion and Commission
Findings
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
exchange.4 In particular, the
Commission finds that the proposal is
consistent with section 6(b)(4) of the
Act,5 which requires that an exchange
have rules that provide for the equitable
allocation of reasonable dues, fees, and
other charges among its members and
other persons using its facilities. The
Commission also finds that the proposal
is consistent with section 6(b)(5) of the
Act,6 which requires, inter alia, that the
rules of a national securities exchange
be designed to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and not designed to permit
unfair discrimination between issuers.
The Commission notes that the
Exchange does not believe the limitation
of the proposed discount to groups of
three or more REITS under common
external management is unfairly
discriminatory. In support of this the
Exchange states that: (i) It has a
reasonable competitive justification for
the discount; (ii) if it applied the
discount to groups of less than three
REITS it could lead to a significant loss
of revenue to the Exchange; and (iii) it
is not increasing the Annual Fees for
REITs, and other, issuers. The
Commission also notes that the
Exchange has represented that the loss
of revenue from the discount, as
proposed, will not hinder its ability to
fulfill its regulatory responsibilities.
The Commission believes it is
reasonable for the Exchange to balance
its need to remain competitive, while at
the same time ensuring adequate
revenue to meet its regulatory
4 In approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
5 15 U.S.C. 78f(b)(4).
6 15 U.S.C. 78f(b)(5).
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Sfmt 4703
8387
responsibilities. The Commission
further notes that the Annual Fees
applicable to all other REITs and
operating companies are remaining
unchanged, so no company that is not
qualified for the discount is being asked
to pay higher Annual Fees than it is
currently paying.
In light of these arguments, the
Commission agrees that the proposed
discount, which is retroactively
effective to January 1, 2008, does not
constitute an inequitable allocation of
reasonable dues, fees, and other charges,
does not permit unfair discrimination
between issuers, and is generally
consistent with the Act.
IV. Conclusion
It is therefore ordered, pursuant to
section 19(b)(2) of the Act,7 that the
proposed rule change (SR–NYSE–2007–
113) is hereby approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–2610 Filed 2–12–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57284; File No. SR–
NYSEArca–2008–16]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rules
Pertaining to the Terms of Index
Option Contracts
February 7, 2008.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on January
30, 2007, NYSE Arca, Inc. (‘‘NYSE
Arca’’ or ‘‘Exchange’’) 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
substantially by NYSE Arca. NYSE Arca
filed the proposed rule change as a
‘‘non-controversial’’ proposed rule
change pursuant to section 19(b)(3)(A)
of the Act 3 and Rule 19b–4(f)(6)
thereunder,4 which renders it effective
7 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
8 17
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8388
Federal Register / Vol. 73, No. 30 / Wednesday, February 13, 2008 / Notices
upon filing with the Commission. 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 Rule
5.19(a) (Terms of Index Option
Contracts) to allow the listing of up to
seven expiration months for options on
certain broad-based indexes. NYSE Arca
proposes to implement the proposed
rule change immediately.
The text of the proposed rule change
is available at https://www.nyse.com, the
principal office of NYSE Arca, and 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,
NYSE Arca included statements
concerning the purpose of and basis for
the proposed rule change. The text of
these statements may be examined at
the places specified in Item IV below.
NYSE Arca has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
rwilkins on PROD1PC63 with NOTICES
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
NYSE Arca proposes to amend Rule
5.19 (Terms of Index Options Contracts)
to allow the Exchange to list up to seven
expiration months for broad-based
security index options upon which a
constant three-month volatility index is
calculated. Currently, Rule 5.19(a)(3)
permits the Exchange to list only six
expiration months in any index options
at any one time.
Volatility products offer investors a
unique set of tools for hedging. For
example, the Chicago Board Options
Exchange (‘‘CBOE’’) Volatility Index
(‘‘VIX’’) options, first introduced in
February 2006, have proven to be one of
CBOE’s most successful new products
ever listed, currently averaging over
90,000 contracts traded per day. In a
recent proposal, CBOE explained that it
plans to introduce new volatility
products and new volatility indexes in
the near future, including the CBOE S&P
500 Three-Month Volatility Index
(‘‘VXV’’).5 Similar to the VIX, the VXV
5 CBOE calculates volatility indexes on other
broad-based security indexes, such as the Dow
Jones Industrial Average index (‘‘DJX’’), the Nasdaq-
VerDate Aug<31>2005
17:45 Feb 12, 2008
Jkt 214001
is a measure of S&P 500 implied
volatility, the volatility implied by S&P
option prices. Instead of reflecting a
constant one-month implied volatility
period, however, VXV is designed to
reflect the implied volatility of an
option with a constant three months to
expiration. Since there is only one day
on which an option has exactly three
months to expiration, VXV is calculated
as a weighted average of options
expiring immediately before and
immediately after the three-month
standard.
Accordingly, an index calculator
would need to use four consecutive
expiration months in order to calculate
a constant three-month volatility index.
Under the current application of NYSE
Arca Rule 5.19(a)(3), the Exchange
generally lists three consecutive near
term months and three months on a
quarterly expiration cycle. One of the
three consecutive near term months is
always a quarterly month; however, that
near term contract month (which is also
a quarterly month) is not included as
part of the three months listed on a
quarterly expiration cycle. Therefore, in
order to permit the addition of four
consecutive near term months under
current Rule 5.19(a)(3), the Exchange
would only be able to list two months
on a quarterly expiration cycle. Because
of customer demand and other
investment strategy reasons for having
three months on a quarterly expiration
cycle, the Exchange is seeking to
increase, from six to seven, the number
of expiration months for broad-based
security index options upon which a
constant three-month volatility index is
calculated.
Proposed Rule 5.19(a)(3)(A) will
permit the Exchange to list up to seven
expiration months at any one time for
any broad-based security index option
contracts (e.g., NDX, RUT) upon which
any exchange calculates a constant
three-month volatility index.
Without this proposed rule, if a threemonth volatility index is calculated
using only three consecutive near term
months, this would result in the VXV’s
being calculated with options expiring
three months apart about one-third of
the time. Another one-third of the time,
VXV would be calculated with options
expiring two months apart. And the
final one-third of the time, VXV would
be calculated with options expiring one
month apart. As a result, the calculation
100 index (‘‘NDX’’), and the Russell 2000 index
(‘‘RUT’’). CBOE may calculate a constant threemonth volatility index on DJX, NDX, or RUT in the
future. See Securities Exchange Act Release No.
56821 (November 20, 2007), 72 FR 66210
(November 27, 2007) (SR–CBOE–2007–82) (‘‘CBOE
proposal’’).
PO 00000
Frm 00126
Fmt 4703
Sfmt 4703
of the three-month VXV under the
current rules would render the VXV
subject to inconsistencies that may
make the index unattractive as an
underlying for volatility products. The
proposed rule change will permit the
Exchange, eight times a year, to add an
additional seventh month in order to
maintain four consecutive near term
contract months.6
Therefore, the Exchange believes that
the addition of a fourth consecutive near
term month for broad-based security
index options upon which a constant
three-month volatility index is
calculated will result in a consistent
calculation in which the option series
that bracket three months to expiration
will always expire one month apart. In
order to accommodate the listing of a
fourth consecutive near term month and
to maintain the listing of three months
on a quarterly expiration cycle, the
Exchange proposes to increase, from six
to seven, the number of expiration
months for broad-based security indexes
on which a constant three-month
volatility index is calculated.
The Exchange also proposes making
minor technical changes to certain
subparagraphs contained in Rule 5.19(a)
in order to accommodate the new rule.
NYSE Arca has analyzed its capacity
and represents that it believes the
Exchange and the Options Price
Reporting Authority have the necessary
systems capacity to handle the
additional traffic associated with the
additional listing of a seventh contract
month in order to maintain four
consecutive near term contract months
for those broad-based security index
options upon which a constant threemonth volatility index is calculated.
2. Statutory Basis
The proposed rule change is
consistent with the provisions of section
6 of the Act,7 in general, and with
sections 6(b)(1) and (b)(5) of the Act,8 in
particular, in that the proposal is
designed 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. NYSE
Arca believes that the proposed rule
6 Examples illustrating the need for a seventh
month in order to maintain four consecutive near
term contract months can be found in the CBOE
proposal, supra note 5.
7 15 U.S.C. 78f.
8 15 U.S.C. 78f(b)(1) and (b)(5).
E:\FR\FM\13FEN1.SGM
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Federal Register / Vol. 73, No. 30 / Wednesday, February 13, 2008 / Notices
change is needed to remain competitive
with other self-regulatory organizations
that have listed the additional option
series.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
NYSE Arca does not believe that the
proposed rule change will impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing 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, it has
become effective pursuant to section
19(b)(3)(A) of the Act 9 and Rule 19b–
4(f)(6) thereunder.10
A proposed rule change filed under
19b–4(f)(6) normally may not become
operative prior to 30 days after the date
of filing.11 However, Rule 19b–
4(f)(6)(iii) 12 permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange has requested that the
Commission waive the 30-day operative
delay, to permit the Exchange to list
options on the Fund immediately. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest. The Commission notes
that another self-regulatory organization
recently adopted a substantially similar
rule change that was effective upon
filing,13 and that this filing raises no
new regulatory issues.
The Commission believes that
increasing, from six to seven, the
9 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
11 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file 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. NYSE Arca has complied with this
requirement.
12 Id.
13 See Securities Exchange Act Release No. 57104
(January 4, 2008), 73 FR 2070 (January 11, 2008)
(SR–ISE–2007–113).
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10 17
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17:45 Feb 12, 2008
Jkt 214001
number of expiration months for broadbased security indexes on which an
Exchange calculates a constant threemonth volatility index (to accommodate
a fourth consecutive near-term month
while maintaining the listing of three
months on a quarterly expiration cycle)
will result in a more consistent and
predictable calculation in which the
option series that bracket three months
to expiration will always expire one
month apart, thereby promoting just and
equitable principles of trade while
protecting investors and the public
interest. The Commission also notes the
Exchange’s representations that it
possesses the necessary systems
capacity to handle the additional traffic
associated with the additional listing of
a seventh contract month in order to
maintain four consecutive near-term
contract months for those broad-based
security index options upon which the
Exchange calculates a constant threemonth volatility index. The Commission
hereby grants the Exchange’s request
and designates the proposal as operative
upon filing.14
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
No. SR–NYSEArca–2008–16 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2008–16. This
14 For purposes only of waiving the 30-day
operative delay of this proposal, the Commission
has considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
PO 00000
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Fmt 4703
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8389
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, 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 NYSE Arca. 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–2008–16 and should be
submitted on or before March 5, 2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–2611 Filed 2–12–08; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF STATE
[Public Notice 6095]
Announcement of Meetings of the
International Telecommunication
Advisory Committee
Summary: This notice announces a
meeting of the International
Telecommunication Advisory
Committee (ITAC) to prepare advice on
the World Telecommunication
Standardization Assembly 2008 (WTSA
08).
The ITAC will meet to prepare advice
for the U.S. on preparations for the
World Telecommunication
Standardization Assembly 2008 (WTSA
08) including positions on
cybersecurity, study program
restructuring, and leadership on
Tuesday afternoon February 26, 2008 2–
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13FEN1
]]>Agencies
[Federal Register Volume 73, Number 30 (Wednesday, February 13, 2008)]
[Notices]
[Pages 8387-8389]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-2611]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57284; File No. SR-NYSEArca-2008-16]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Rules
Pertaining to the Terms of Index Option Contracts
February 7, 2008.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on January 30, 2007, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange'') 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 substantially by NYSE Arca.
NYSE Arca filed the proposed rule change as a ``non-controversial''
proposed rule change pursuant to section 19(b)(3)(A) of the Act \3\ and
Rule 19b-4(f)(6) thereunder,\4\ which renders it effective
[[Page 8388]]
upon filing with the Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NYSE Arca proposes to amend Rule 5.19(a) (Terms of Index Option
Contracts) to allow the listing of up to seven expiration months for
options on certain broad-based indexes. NYSE Arca proposes to implement
the proposed rule change immediately.
The text of the proposed rule change is available at https://
www.nyse.com, the principal office of NYSE Arca, and 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, NYSE Arca included statements
concerning the purpose of and basis for the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. NYSE Arca 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
NYSE Arca proposes to amend Rule 5.19 (Terms of Index Options
Contracts) to allow the Exchange to list up to seven expiration months
for broad-based security index options upon which a constant three-
month volatility index is calculated. Currently, Rule 5.19(a)(3)
permits the Exchange to list only six expiration months in any index
options at any one time.
Volatility products offer investors a unique set of tools for
hedging. For example, the Chicago Board Options Exchange (``CBOE'')
Volatility Index (``VIX'') options, first introduced in February 2006,
have proven to be one of CBOE's most successful new products ever
listed, currently averaging over 90,000 contracts traded per day. In a
recent proposal, CBOE explained that it plans to introduce new
volatility products and new volatility indexes in the near future,
including the CBOE S&P 500 Three-Month Volatility Index (``VXV'').\5\
Similar to the VIX, the VXV is a measure of S&P 500 implied volatility,
the volatility implied by S&P option prices. Instead of reflecting a
constant one-month implied volatility period, however, VXV is designed
to reflect the implied volatility of an option with a constant three
months to expiration. Since there is only one day on which an option
has exactly three months to expiration, VXV is calculated as a weighted
average of options expiring immediately before and immediately after
the three-month standard.
---------------------------------------------------------------------------
\5\ CBOE calculates volatility indexes on other broad-based
security indexes, such as the Dow Jones Industrial Average index
(``DJX''), the Nasdaq-100 index (``NDX''), and the Russell 2000
index (``RUT''). CBOE may calculate a constant three-month
volatility index on DJX, NDX, or RUT in the future. See Securities
Exchange Act Release No. 56821 (November 20, 2007), 72 FR 66210
(November 27, 2007) (SR-CBOE-2007-82) (``CBOE proposal'').
---------------------------------------------------------------------------
Accordingly, an index calculator would need to use four consecutive
expiration months in order to calculate a constant three-month
volatility index. Under the current application of NYSE Arca Rule
5.19(a)(3), the Exchange generally lists three consecutive near term
months and three months on a quarterly expiration cycle. One of the
three consecutive near term months is always a quarterly month;
however, that near term contract month (which is also a quarterly
month) is not included as part of the three months listed on a
quarterly expiration cycle. Therefore, in order to permit the addition
of four consecutive near term months under current Rule 5.19(a)(3), the
Exchange would only be able to list two months on a quarterly
expiration cycle. Because of customer demand and other investment
strategy reasons for having three months on a quarterly expiration
cycle, the Exchange is seeking to increase, from six to seven, the
number of expiration months for broad-based security index options upon
which a constant three-month volatility index is calculated.
Proposed Rule 5.19(a)(3)(A) will permit the Exchange to list up to
seven expiration months at any one time for any broad-based security
index option contracts (e.g., NDX, RUT) upon which any exchange
calculates a constant three-month volatility index.
Without this proposed rule, if a three-month volatility index is
calculated using only three consecutive near term months, this would
result in the VXV's being calculated with options expiring three months
apart about one-third of the time. Another one-third of the time, VXV
would be calculated with options expiring two months apart. And the
final one-third of the time, VXV would be calculated with options
expiring one month apart. As a result, the calculation of the three-
month VXV under the current rules would render the VXV subject to
inconsistencies that may make the index unattractive as an underlying
for volatility products. The proposed rule change will permit the
Exchange, eight times a year, to add an additional seventh month in
order to maintain four consecutive near term contract months.\6\
---------------------------------------------------------------------------
\6\ Examples illustrating the need for a seventh month in order
to maintain four consecutive near term contract months can be found
in the CBOE proposal, supra note 5.
---------------------------------------------------------------------------
Therefore, the Exchange believes that the addition of a fourth
consecutive near term month for broad-based security index options upon
which a constant three-month volatility index is calculated will result
in a consistent calculation in which the option series that bracket
three months to expiration will always expire one month apart. In order
to accommodate the listing of a fourth consecutive near term month and
to maintain the listing of three months on a quarterly expiration
cycle, the Exchange proposes to increase, from six to seven, the number
of expiration months for broad-based security indexes on which a
constant three-month volatility index is calculated.
The Exchange also proposes making minor technical changes to
certain subparagraphs contained in Rule 5.19(a) in order to accommodate
the new rule.
NYSE Arca has analyzed its capacity and represents that it believes
the Exchange and the Options Price Reporting Authority have the
necessary systems capacity to handle the additional traffic associated
with the additional listing of a seventh contract month in order to
maintain four consecutive near term contract months for those broad-
based security index options upon which a constant three-month
volatility index is calculated.
2. Statutory Basis
The proposed rule change is consistent with the provisions of
section 6 of the Act,\7\ in general, and with sections 6(b)(1) and
(b)(5) of the Act,\8\ in particular, in that the proposal is designed
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.
NYSE Arca believes that the proposed rule
[[Page 8389]]
change is needed to remain competitive with other self-regulatory
organizations that have listed the additional option series.
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\7\ 15 U.S.C. 78f.
\8\ 15 U.S.C. 78f(b)(1) and (b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NYSE Arca does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing 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, it has become
effective pursuant to section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under 19b-4(f)(6) normally may not
become operative prior to 30 days after the date of filing.\11\
However, Rule 19b-4(f)(6)(iii) \12\ permits the Commission to designate
a shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange has requested that the
Commission waive the 30-day operative delay, to permit the Exchange to
list options on the Fund immediately. The Commission believes that
waiving the 30-day operative delay is consistent with the protection of
investors and the public interest. The Commission notes that another
self-regulatory organization recently adopted a substantially similar
rule change that was effective upon filing,\13\ and that this filing
raises no new regulatory issues.
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\11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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.
NYSE Arca has complied with this requirement.
\12\ Id.
\13\ See Securities Exchange Act Release No. 57104 (January 4,
2008), 73 FR 2070 (January 11, 2008) (SR-ISE-2007-113).
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The Commission believes that increasing, from six to seven, the
number of expiration months for broad-based security indexes on which
an Exchange calculates a constant three-month volatility index (to
accommodate a fourth consecutive near-term month while maintaining the
listing of three months on a quarterly expiration cycle) will result in
a more consistent and predictable calculation in which the option
series that bracket three months to expiration will always expire one
month apart, thereby promoting just and equitable principles of trade
while protecting investors and the public interest. The Commission also
notes the Exchange's representations that it possesses the necessary
systems capacity to handle the additional traffic associated with the
additional listing of a seventh contract month in order to maintain
four consecutive near-term contract months for those broad-based
security index options upon which the Exchange calculates a constant
three-month volatility index. The Commission hereby grants the
Exchange's request and designates the proposal as operative upon
filing.\14\
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\14\ For purposes only of waiving the 30-day operative delay of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File No. SR-NYSEArca-2008-16 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2008-16. 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, 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 NYSE Arca. 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-2008-16 and should be submitted on or before
March 5, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-2611 Filed 2-12-08; 8:45 am]
BILLING CODE 8011-01-P
