Self-Regulatory Organizations; American Stock Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Quarterly Options Series Pilot Program To Permit the Listing of Additional Series, 18593-18596 [E8-7027]
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Federal Register / Vol. 73, No. 66 / Friday, April 4, 2008 / Notices
sells his specialty ETF on the Exchange
and is a provider of liquidity in that
transaction (e.g., the specialist’s quote is
traded against or the specialist offsets an
order imbalance as part of an opening or
closing transaction). The RSP payment
is comprised of $0.0004 per share (or 4
cents per 100 shares) for all shares
executed on the Exchange in their
specialty ETF (irrespective of whether
the specialist is the provider of
liquidity), plus another $0.0020 (or 20
cents per 100 shares) if the specialist is
the provider of liquidity in the
transaction. If the specialist is not the
liquidity provider, then the RSP
payment is limited to $0.0004 per share
executed on the Exchange in its
specialty ETF.
• Registered traders in ETFs will
receive an RSP payment of $0.0010 per
share (or 10 cents per 100 shares)
whenever the registered trader either
buys or sells an ETF on the Exchange
and is a provider of liquidity in that
transaction.6
• No ETF quoting participant will
receive an RSP payment when another
ETF quoting participant is a contraparty to the same transaction.
• RSP payments will be made on
transactions in securities trading at less
than $1 only in amounts proportionate
to the amount on which the Exchange
collects revenue.
• Customer transaction charges are
capped at $100 per transaction, meaning
that the transaction charge of $0.0023
per share is assessed only on the first
43,478 shares executed, and an ETF
quoting participant would receive an
RSP payment based only on the first
43,478 shares executed.
2. Statutory Basis
ebenthall on PRODPC61 with NOTICES
Amex believes the proposed rule
change is consistent with Section 6(b) of
the Act 7 in general, and furthers the
objectives of Section 6(b)(4) of the Act 8
in particular, in that it is intended to
assure the equitable allocation of
reasonable dues, fees, and other charges
among its members and issuers and
other persons using its facilities.
Specifically, the Exchange proposes to
retroactively apply the RSP to assure
continuity of the program from its
inception and to assure fairness for the
ETF quoting participants.
6 The RSP for DARTs, although described in SR–
Amex–2008–23 and SR–Amex–2008–25 (see supra
note 4), does not require any retroactive application
because DARTs did not actually begin trading on
the Exchange until after the effective date of Amex’s
filing reinstating the RSP.
7 15 U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(4).
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15:24 Apr 03, 2008
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange believes that the
proposed rule change does not 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
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
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 the 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.
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
Number SR–Amex–2008–34 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–Amex–2008–34. 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
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18593
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 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–Amex–2008–34 and should
be submitted on or before April 25,
2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–7026 Filed 4–3–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57581; File No. SR–Amex–
2008–31]
Self-Regulatory Organizations;
American Stock Exchange, LLC;
Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change To Amend the Quarterly
Options Series Pilot Program To
Permit the Listing of Additional Series
March 31, 2008.
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 March 25,
2008, the American Stock Exchange,
LLC (‘‘Exchange’’ or ‘‘Amex’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been substantially prepared by the
Exchange. The Exchange has designated
this proposal as non-controversial under
9 17
CFR 200.30–3(a)(12)
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 73, No. 66 / Friday, April 4, 2008 / Notices
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder,4 which
renders the proposed rule change
effective 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
The Exchange proposes to amend
Amex Rule 903, Commentary .09
(Quarterly Options Series Pilot Program)
to permit the Exchange to list strike
prices for Quarterly Options Series
(‘‘QOS’’) in exchange traded fund
(‘‘ETF’’) options that fall within a
percentage range (30%) above and
below the price of the underlying ETF.
Additionally, upon demonstrated
customer interest, the Exchange also
will be permitted to open additional
strike prices of QOS in ETF options that
are more than 30% above or below the
current price of the ETF. Specialists and
registered options traders (‘‘ROTs’’)
trading for their own account will not be
considered when determining customer
interest under this provision. In
addition to the initial listed series, the
Exchange may list up to sixty (60)
additional series per expiration month
for each QOS in ETF options. Further,
the proposal includes a delisting
program to be undertaken by the
Exchange in connection with QOS in
ETF options.
The text of the proposed rule change
is available on the Exchange’s Web site
(https://www.amex.com), at the
Exchange’s principal office, 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
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 purpose of this proposal is to
amend Amex Rule 903, Commentary .09
(Quarterly Options Series Pilot Program)
to allow the Exchange to open
additional strike prices of QOS in ETF
options that are within thirty percent
(30%) above or below the closing price
of the underlying ETF on the preceding
business day. Additionally, upon
demonstrated customer interest, the
Exchange also will be permitted to open
additional strike prices of QOS in ETF
options that are more than 30% above
or below the current price of the
underlying ETF. Specialists and ROTs
trading for their own account will not be
considered when determining customer
interest under this provision. In
addition, the Exchange will be
permitted to list up to sixty (60)
October 2007
additional series per expiration month
for each QOS in ETF options.
On July 11, 2006, the Exchange filed
with the Commission a pilot program
proposal to permit the listing and
trading of QOS in options on indexes or
options on ETFs that satisfy the
applicable listing criteria under Amex
rules.5 QOS trade based on calendar
quarters that end in March, June,
September and December. The
Exchange lists QOS that expire at the
end of the next consecutive four
calendar quarters, as well as the fourth
quarter of the next calendar year. For
example, if the Exchange were trading
QOS in the iShares Russell 2000 Index
Fund (‘‘IWM’’) in the month of April
2008, it would list series at the end of
the second quarter 2008 (June), third
quarter 2008 (September), fourth quarter
2008 (December) and first quarter 2009
(March) and fourth quarter 2009
(December).
Currently, the Exchange lists QOS in
five ETF options: (1) Nasdaq–100 Index
Tracking Stock (‘‘QQQQ’’); (2) IWM; (3)
DIAMONDS Trust, Series 1 (‘‘DIA’’); (4)
Standard & Poor’s Depository Receipts
(‘‘SPY’’); and (5) Energy Select SPDR
(‘‘XLE’’). The average trading volume
and total volume for QOS in IWM
options, QQQQ options, and SPY
options exceed the volumes for QOS in
the other ETF options (DIA and XLE)
that are listed and traded on the
Exchange. The chart below provides
trading volume figures for the fourth
quarter in 2007, demonstrating that,
depending on the particular month,
QOS in IWM, QQQQ, or SPY options
are the most popular and heavily traded
QOS on the Exchange.
November 2007
December 2007
QOS
ADV
IWM ..........................................................
QQQQ ......................................................
SPY ..........................................................
DIA ...........................................................
XLE ..........................................................
715
1,004
2,793
3
60
ebenthall on PRODPC61 with NOTICES
Over time, the Exchange has
continually received requests from
market participants to add additional
strike prices for QOS in IWM, QQQQ,
and SPY options that would be outside
of the price range for setting strikes as
provided under Commentary .09 to Rule
3 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
5· See Securities Exchange Act Release No.
54137 (July 12, 2006), 71 FR 41283 (July 20, 2006)
(SR–Amex–2006–67) (‘‘Pilot Program Release’’).
Under the Pilot Program, the Exchange is permitted
4 17
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Jkt 214001
Total Vol
ADV
16,443
23,103
64,234
63
1,390
9,435
4,655
4,509
38
1,721
Total Vol
198,143
97,763
94,688
792
36,143
ADV
6,306
11,303
4,046
72
843
Total Vol
126,119
226,068
80,911
1,435
16,866
903 (hereinafter the ‘‘+/¥$5 range’’).6
Investors and other market participants
have advised the Exchange that they are
buying and selling QOS in IWM, QQQQ,
and SPY options to trade volatility. In
order to adequately replicate the desired
volatility exposure, these market
participants need to trade several
options series in IWM, QQQQ, and SPY,
many having strike prices that fall
outside of the +/¥$5 range currently
allowed under the QOS rules.
In addition, other participants have
advised the Exchange that their
to list QOS in up to five currently listed option
classes that are either options on ETFs or indexes.
The Exchange is also permitted to list QOS in any
options class that is selected by other securities
exchanges that employ a similar Pilot Program
under their respective rules.
6 Commentary .09(c) to Rule 903 provides that the
Exchange shall list strike prices for a QOS that are
within $5 from the closing price of the underlying
on the preceding day.
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Federal Register / Vol. 73, No. 66 / Friday, April 4, 2008 / Notices
ebenthall on PRODPC61 with NOTICES
investment strategies involve trading
options tied to a particular option
‘‘delta,’’ 7 rather than a particular level
of the underlying security or index. At
issue is the fact that delta depends on
both the relative difference between the
level of the underlying security or index
and the option strike price and time to
expiration. For example, with IWM
trading at $85 per share, the strike price
corresponding to a ‘‘25-delta’’ IWM call
(i.e., a call option with a delta of 25)
with one month to expiration would be
89. However, the strike price
corresponding to a ‘‘25-delta’’ IWM call
with 3 months to expiration would be
93, and the strike price of a ‘‘25-delta’’
IWM call with 1 year to expiration
would be 106. In short, the Exchange
has been advised that the +/¥$5 range
for QOS in IWM, QQQQ, and SPY
options is insufficient to satisfy
customer demand.
In order to meet customer demand,
the Exchange proposes to amend
Commentary .09 to Rule 903, which
governs the Quarterly Options Series
Pilot Program. Specifically, the
Exchange proposes to revise
Commentary .09 to Rule 903 to allow
the Exchange to open additional strike
prices of QOS in ETF options that are
within thirty percent (30%) above or
below the closing price of the
underlying ETF Shares (as defined in
Rule 900(b)(42)) on the preceding
business day. The Exchange also will be
permitted to open additional strike
prices of QOS in ETF options that are
more than 30% above or below the
current price of the underlying ETF,
provided that demonstrated customer
interest exists for such series, as
expressed by institutional, corporate, or
individual customers or their brokers.
Specialists and ROTs trading for their
own account will not be considered
when determining customer interest
under this proposed provision. The
Exchange will be permitted to list up to
sixty (60) additional series per
expiration month for each QOS in ETF
options.
The Exchange also is proposing to add
new paragraph (e) to Commentary .09 to
Rule 903, which will set forth a
delisting policy. Specifically, with
respect to QOS in ETF options, the
Exchange will, on a monthly basis,
review series that are outside a range of
five strikes above and five strikes below
the current price of the underlying ETF,
and de-list series with no open interest
7 ‘‘Delta’’ is a measure of how an option price will
change in response to a $1 price change in the
underlying security or index. For example, XYZ
option with a delta of ‘‘50’’ can be expected to
change by $0.50 in response to a $1 change in the
price of XYZ.
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in both the put and the call series
having: (1) A strike higher than the
highest strike price with open interest in
the put and/or call series for a given
expiration month; or (2) a strike lower
than the lowest strike price with open
interest in the put and/or call series for
a given expiration month. To illustrate
how the proposed delisting program
will work, assume that IWM closed at
$70 on the day the Exchange conducts
the monthly review of QOS in ETF
options. Series having strike prices
above $75 and below $65 would be
reviewed by the Exchange for possible
delisting. Assume that the Exchange
lists the following QOS in IWM options
that expire in June 2008:
Calls—June 08 Exp
Puts—June 08 Exp
Strike
Open
interest?
Strike
Open
interest?
62
63
64
*
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
No
No
Yes
*
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
Yes
Yes
Yes
Yes
Yes
No
No
No
62
63
64
*
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
No
Yes
Yes
*
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
Yes
No
Yes
Yes
No
No
No
No
No
The Exchange would de-list the first
series listed above, as well as the last
three: $62, $91, $92, and $93. The
Exchange would not, however, de-list
the $83 and $84 series because there are
series having open interest with strike
prices higher than these two series. In
addition, the Exchange would not delist the $63 series because there is open
interest in the put series.
Notwithstanding the proposed delisting
policy, customer requests to add strikes
and/or maintain strikes in QOS in ETF
options in series eligible for delisting
shall be granted. Further, in connection
with the proposed delisting policy, if
the Exchange identifies series for
delisting, the Exchange shall notify
other options exchanges with similar
delisting policies regarding eligible
series for listing, and shall work with
such other exchanges to develop a
uniform list of series to be de-listed, so
as to ensure uniform series delisting of
multiply-listed QOS in ETF options.
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18595
The Exchange expects that all options
exchanges that have a QOS Pilot
Program will adopt the proposed
delisting policy.
The Exchange represents that it has
the necessary systems capacity to
support new options series that will
result from this proposal. Further, as
proposed, the Exchange notes that this
rule change will become part of the pilot
program and, going forward, will be
considered by the Commission when
the Exchange seeks to renew or make
permanent the pilot program in the
future.8
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) 9 of the Act
in general and furthers the objectives of
Section 6(b)(5) 10 in particular in that it
is designed to prevent fraudulent and
manipulative acts and practices,
promote just and equitable principles of
trade, remove impediments to and
perfect the mechanisms of a free and
open market and a national market
system, and, in general, protect
investors and the public interest. The
Exchange believes that adoption of this
proposal will promote competition
among the options exchanges related to
the quarterly options series pilot
programs.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange believes that the
proposed rule change will impose no
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
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has designated the
proposed rule change as one that: (1)
Does not significantly affect the
protection of investors or the public
8 To the extent the Commission views the
proposed rule change as an expansion of the pilot
program, thus triggering the requirement under the
terms of the Pilot Program Approval Order that the
Exchange submit a pilot program report, the
Exchange notes that it submitted a report on June
28, 2007, in connection with its filing to extend the
pilot program through July 10, 2008. See Securities
Exchange Act Release No. 56032 (July 9, 2007), 72
FR 38634 (July 13, 2007).
9 15 U.S.C. 78f(b).
10 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 73, No. 66 / Friday, April 4, 2008 / Notices
interest; (2) does not impose any
significant burden on competition; and
(3) does not become operative for 30
days from the date of filing, or such
shorter time as the Commission may
designate if consistent with the
protection of investors and the public
interest. Therefore, the foregoing rule
change has become effective pursuant to
Section 19(b)(3)(A) of the Act 11 and
subparagraph (f)(6) of Rule 19b–4
thereunder.12 The Exchange has asked
the Commission to waive the 30-day
operative delay to permit the Exchange
to immediately compete with the other
options exchanges that have similarly
amended their quarterly options series
pilot programs.
The Commission notes that this
proposal is substantially similar to a
proposed rule change submitted by the
Chicago Board Options Exchange,
which was approved by the Commission
following publication for notice and
comment, and does not raise any new
regulatory issues.13 Waiving the 30-day
operative delay will promote, without
undue delay, further competition in the
options market.14 For these reasons, the
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest and designates the
proposal operative upon filing.
The Commission notes that this rule
change will become part of the pilot
program and, going forward, its effects
will be considered by the Commission
in the event that the Exchange seeks to
renew or make permanent the pilot
program.15 Thus, in the Exchange’s
ebenthall on PRODPC61 with NOTICES
11 15
U.S.C. 78s(b)(3)(A).
12 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
provide the Commission with written notice of its
intent to file the proposed rule change, along with
a brief description and text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission. The
Exchange has fulfilled this requirement.
13 See Securities Exchange Act Release No. 57410
(March 3, 2008), 73 FR 12483 (March 7, 2008) (SR–
CBOE–2007–96). See also Securities Exchange Act
Release No. 57425 (March 4, 2008), 73 FR 12783
(March 10, 2008) (SR–ISE–2008–19).
14 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
15 As set forth in the Pilot Program Release, if the
Exchange were to propose an extension, expansion,
or permanent approval of the Pilot Program, the
Exchange must submit, along with any filing
proposing such amendments to the program, a
report that provides an analysis of the Pilot Program
covering the entire period during which the Pilot
Program was in effect. See Pilot Program Release,
supra note 5. The Pilot Program Release requires the
Exchange to include in its report, at a minimum: (1)
Data and written analysis on the open interest and
trading volume in the classes for which QOS were
opened; (2) an assessment of the appropriateness of
the option classes selected for the Pilot Program; (3)
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future reports on the Pilot Program, the
Exchange should include analysis of (1)
the impact of the additional series on
the Exchange’s market and quote
capacity, and (2) the implementation
and effects of the delisting policy,
including the number of series eligible
for delisting during the period covered
by the report, the number of series
actually delisted during that period
(pursuant to the delisting policy or
otherwise), and documentation of any
customer requests to maintain QOS
strikes that were otherwise eligible for
delisting.
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
the 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–Amex–2008–31 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–Amex–2008–31. 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
an assessment of the impact of the Pilot Program on
the capacity of the Exchange, OPRA, and market
data vendors (to the extent data from market data
vendors is available); (4) any capacity problems or
other problems that arose during the operation of
the Pilot Program and how the Exchange addressed
such problems; (5) any complaints that the
Exchange received during the operation of the Pilot
Program and how the Exchange addressed them;
and (6) any additional information that would assist
in assessing the operation of the Pilot Program.
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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–Amex–2008–31 and should
be submitted on or before April 25,
2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–7027 Filed 4–3–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57582; File No. SR–CBOE–
2008–34]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Increase the Class
Quoting Limit in Certain Option
Classes
March 31, 2008.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (‘‘Act’’
or ‘‘Exchange Act’’),1 and Rule 19b–4
thereunder,2 notice is hereby given that
on March 26, 2008, the Chicago Board
Options Exchange, Incorporated
(‘‘CBOE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’ or ‘‘SEC’’) the proposed
rule change as described in Items I, II,
and III below, which Items have been
prepared by the CBOE. The Exchange
has designated this proposal as one
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\04APN1.SGM
04APN1
]]>Agencies
[Federal Register Volume 73, Number 66 (Friday, April 4, 2008)]
[Notices]
[Pages 18593-18596]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-7027]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57581; File No. SR-Amex-2008-31]
Self-Regulatory Organizations; American Stock Exchange, LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Quarterly Options Series Pilot Program To Permit the Listing
of Additional Series
March 31, 2008.
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 March 25, 2008, the American Stock Exchange, LLC (``Exchange'' or
``Amex'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been substantially prepared by the Exchange.
The Exchange has designated this proposal as non-controversial under
[[Page 18594]]
Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6)
thereunder,\4\ which renders the proposed rule change effective upon
filing with the Commission. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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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 Amex Rule 903, Commentary .09
(Quarterly Options Series Pilot Program) to permit the Exchange to list
strike prices for Quarterly Options Series (``QOS'') in exchange traded
fund (``ETF'') options that fall within a percentage range (30%) above
and below the price of the underlying ETF. Additionally, upon
demonstrated customer interest, the Exchange also will be permitted to
open additional strike prices of QOS in ETF options that are more than
30% above or below the current price of the ETF. Specialists and
registered options traders (``ROTs'') trading for their own account
will not be considered when determining customer interest under this
provision. In addition to the initial listed series, the Exchange may
list up to sixty (60) additional series per expiration month for each
QOS in ETF options. Further, the proposal includes a delisting program
to be undertaken by the Exchange in connection with QOS in ETF options.
The text of the proposed rule change is available on the Exchange's
Web site (https://www.amex.com), at the Exchange's principal office, 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 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 purpose of this proposal is to amend Amex Rule 903, Commentary
.09 (Quarterly Options Series Pilot Program) to allow the Exchange to
open additional strike prices of QOS in ETF options that are within
thirty percent (30%) above or below the closing price of the underlying
ETF on the preceding business day. Additionally, upon demonstrated
customer interest, the Exchange also will be permitted to open
additional strike prices of QOS in ETF options that are more than 30%
above or below the current price of the underlying ETF. Specialists and
ROTs trading for their own account will not be considered when
determining customer interest under this provision. In addition, the
Exchange will be permitted to list up to sixty (60) additional series
per expiration month for each QOS in ETF options.
On July 11, 2006, the Exchange filed with the Commission a pilot
program proposal to permit the listing and trading of QOS in options on
indexes or options on ETFs that satisfy the applicable listing criteria
under Amex rules.\5\ QOS trade based on calendar quarters that end in
March, June, September and December. The Exchange lists QOS that expire
at the end of the next consecutive four calendar quarters, as well as
the fourth quarter of the next calendar year. For example, if the
Exchange were trading QOS in the iShares Russell 2000 Index Fund
(``IWM'') in the month of April 2008, it would list series at the end
of the second quarter 2008 (June), third quarter 2008 (September),
fourth quarter 2008 (December) and first quarter 2009 (March) and
fourth quarter 2009 (December).
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\5-\ See Securities Exchange Act Release No. 54137 (July 12,
2006), 71 FR 41283 (July 20, 2006) (SR-Amex-2006-67) (``Pilot
Program Release''). Under the Pilot Program, the Exchange is
permitted to list QOS in up to five currently listed option classes
that are either options on ETFs or indexes. The Exchange is also
permitted to list QOS in any options class that is selected by other
securities exchanges that employ a similar Pilot Program under their
respective rules.
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Currently, the Exchange lists QOS in five ETF options: (1) Nasdaq-
100 Index Tracking Stock (``QQQQ''); (2) IWM; (3) DIAMONDS Trust,
Series 1 (``DIA''); (4) Standard & Poor's Depository Receipts
(``SPY''); and (5) Energy Select SPDR (``XLE''). The average trading
volume and total volume for QOS in IWM options, QQQQ options, and SPY
options exceed the volumes for QOS in the other ETF options (DIA and
XLE) that are listed and traded on the Exchange. The chart below
provides trading volume figures for the fourth quarter in 2007,
demonstrating that, depending on the particular month, QOS in IWM,
QQQQ, or SPY options are the most popular and heavily traded QOS on the
Exchange.
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October 2007 November 2007 December 2007
QOS -----------------------------------------------------------------------------------------------
ADV Total Vol ADV Total Vol ADV Total Vol
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IWM..................................................... 715 16,443 9,435 198,143 6,306 126,119
QQQQ.................................................... 1,004 23,103 4,655 97,763 11,303 226,068
SPY..................................................... 2,793 64,234 4,509 94,688 4,046 80,911
DIA..................................................... 3 63 38 792 72 1,435
XLE..................................................... 60 1,390 1,721 36,143 843 16,866
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Over time, the Exchange has continually received requests from
market participants to add additional strike prices for QOS in IWM,
QQQQ, and SPY options that would be outside of the price range for
setting strikes as provided under Commentary .09 to Rule 903
(hereinafter the ``+/-$5 range'').\6\ Investors and other market
participants have advised the Exchange that they are buying and selling
QOS in IWM, QQQQ, and SPY options to trade volatility. In order to
adequately replicate the desired volatility exposure, these market
participants need to trade several options series in IWM, QQQQ, and
SPY, many having strike prices that fall outside of the +/-$5 range
currently allowed under the QOS rules.
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\6\ Commentary .09(c) to Rule 903 provides that the Exchange
shall list strike prices for a QOS that are within $5 from the
closing price of the underlying on the preceding day.
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In addition, other participants have advised the Exchange that
their
[[Page 18595]]
investment strategies involve trading options tied to a particular
option ``delta,'' \7\ rather than a particular level of the underlying
security or index. At issue is the fact that delta depends on both the
relative difference between the level of the underlying security or
index and the option strike price and time to expiration. For example,
with IWM trading at $85 per share, the strike price corresponding to a
``25-delta'' IWM call (i.e., a call option with a delta of 25) with one
month to expiration would be 89. However, the strike price
corresponding to a ``25-delta'' IWM call with 3 months to expiration
would be 93, and the strike price of a ``25-delta'' IWM call with 1
year to expiration would be 106. In short, the Exchange has been
advised that the +/-$5 range for QOS in IWM, QQQQ, and SPY options is
insufficient to satisfy customer demand.
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\7\ ``Delta'' is a measure of how an option price will change in
response to a $1 price change in the underlying security or index.
For example, XYZ option with a delta of ``50'' can be expected to
change by $0.50 in response to a $1 change in the price of XYZ.
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In order to meet customer demand, the Exchange proposes to amend
Commentary .09 to Rule 903, which governs the Quarterly Options Series
Pilot Program. Specifically, the Exchange proposes to revise Commentary
.09 to Rule 903 to allow the Exchange to open additional strike prices
of QOS in ETF options that are within thirty percent (30%) above or
below the closing price of the underlying ETF Shares (as defined in
Rule 900(b)(42)) on the preceding business day. The Exchange also will
be permitted to open additional strike prices of QOS in ETF options
that are more than 30% above or below the current price of the
underlying ETF, provided that demonstrated customer interest exists for
such series, as expressed by institutional, corporate, or individual
customers or their brokers. Specialists and ROTs trading for their own
account will not be considered when determining customer interest under
this proposed provision. The Exchange will be permitted to list up to
sixty (60) additional series per expiration month for each QOS in ETF
options.
The Exchange also is proposing to add new paragraph (e) to
Commentary .09 to Rule 903, which will set forth a delisting policy.
Specifically, with respect to QOS in ETF options, the Exchange will, on
a monthly basis, review series that are outside a range of five strikes
above and five strikes below the current price of the underlying ETF,
and de-list series with no open interest in both the put and the call
series having: (1) A strike higher than the highest strike price with
open interest in the put and/or call series for a given expiration
month; or (2) a strike lower than the lowest strike price with open
interest in the put and/or call series for a given expiration month. To
illustrate how the proposed delisting program will work, assume that
IWM closed at $70 on the day the Exchange conducts the monthly review
of QOS in ETF options. Series having strike prices above $75 and below
$65 would be reviewed by the Exchange for possible delisting. Assume
that the Exchange lists the following QOS in IWM options that expire in
June 2008:
------------------------------------------------------------------------
Calls--June 08 Exp Puts--June 08 Exp
------------------------------------------------------------------------
Strike Open interest? Strike Open interest?
------------------------------------------------------------------------
62 No 62 No
63 No 63 Yes
64 Yes 64 Yes
* * * *
76 Yes 76 Yes
77 Yes 77 Yes
78 Yes 78 Yes
79 Yes 79 Yes
80 Yes 80 Yes
81 Yes 81 Yes
82 Yes 82 Yes
83 No 83 No
84 No 84 No
85 No 85 Yes
86 Yes 86 No
87 Yes 87 Yes
88 Yes 88 Yes
89 Yes 89 No
90 Yes 90 No
91 No 91 No
92 No 92 No
93 No 93 No
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The Exchange would de-list the first series listed above, as well
as the last three: $62, $91, $92, and $93. The Exchange would not,
however, de-list the $83 and $84 series because there are series having
open interest with strike prices higher than these two series. In
addition, the Exchange would not de-list the $63 series because there
is open interest in the put series. Notwithstanding the proposed
delisting policy, customer requests to add strikes and/or maintain
strikes in QOS in ETF options in series eligible for delisting shall be
granted. Further, in connection with the proposed delisting policy, if
the Exchange identifies series for delisting, the Exchange shall notify
other options exchanges with similar delisting policies regarding
eligible series for listing, and shall work with such other exchanges
to develop a uniform list of series to be de-listed, so as to ensure
uniform series delisting of multiply-listed QOS in ETF options. The
Exchange expects that all options exchanges that have a QOS Pilot
Program will adopt the proposed delisting policy.
The Exchange represents that it has the necessary systems capacity
to support new options series that will result from this proposal.
Further, as proposed, the Exchange notes that this rule change will
become part of the pilot program and, going forward, will be considered
by the Commission when the Exchange seeks to renew or make permanent
the pilot program in the future.\8\
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\8\ To the extent the Commission views the proposed rule change
as an expansion of the pilot program, thus triggering the
requirement under the terms of the Pilot Program Approval Order that
the Exchange submit a pilot program report, the Exchange notes that
it submitted a report on June 28, 2007, in connection with its
filing to extend the pilot program through July 10, 2008. See
Securities Exchange Act Release No. 56032 (July 9, 2007), 72 FR
38634 (July 13, 2007).
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2. Statutory Basis
The proposed rule change is consistent with Section 6(b) \9\ of the
Act in general and furthers the objectives of Section 6(b)(5) \10\ in
particular in that it is designed to prevent fraudulent and
manipulative acts and practices, promote just and equitable principles
of trade, remove impediments to and perfect the mechanisms of a free
and open market and a national market system, and, in general, protect
investors and the public interest. The Exchange believes that adoption
of this proposal will promote competition among the options exchanges
related to the quarterly options series pilot programs.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the proposed rule change will impose no
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
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has designated the proposed rule change as one that:
(1) Does not significantly affect the protection of investors or the
public
[[Page 18596]]
interest; (2) does not impose any significant burden on competition;
and (3) does not become operative for 30 days from the date of filing,
or such shorter time as the Commission may designate if consistent with
the protection of investors and the public interest. Therefore, the
foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \11\ and subparagraph (f)(6) of Rule 19b-4
thereunder.\12\ The Exchange has asked the Commission to waive the 30-
day operative delay to permit the Exchange to immediately compete with
the other options exchanges that have similarly amended their quarterly
options series pilot programs.
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to provide the Commission
with written notice of its intent to file the proposed rule change,
along with a brief description and text of the proposed rule change,
at least five business days prior to the date of filing of the
proposed rule change, or such shorter time as designated by the
Commission. The Exchange has fulfilled this requirement.
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The Commission notes that this proposal is substantially similar to
a proposed rule change submitted by the Chicago Board Options Exchange,
which was approved by the Commission following publication for notice
and comment, and does not raise any new regulatory issues.\13\ Waiving
the 30-day operative delay will promote, without undue delay, further
competition in the options market.\14\ For these reasons, the
Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest and
designates the proposal operative upon filing.
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\13\ See Securities Exchange Act Release No. 57410 (March 3,
2008), 73 FR 12483 (March 7, 2008) (SR-CBOE-2007-96). See also
Securities Exchange Act Release No. 57425 (March 4, 2008), 73 FR
12783 (March 10, 2008) (SR-ISE-2008-19).
\14\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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The Commission notes that this rule change will become part of the
pilot program and, going forward, its effects will be considered by the
Commission in the event that the Exchange seeks to renew or make
permanent the pilot program.\15\ Thus, in the Exchange's future reports
on the Pilot Program, the Exchange should include analysis of (1) the
impact of the additional series on the Exchange's market and quote
capacity, and (2) the implementation and effects of the delisting
policy, including the number of series eligible for delisting during
the period covered by the report, the number of series actually
delisted during that period (pursuant to the delisting policy or
otherwise), and documentation of any customer requests to maintain QOS
strikes that were otherwise eligible for delisting.
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\15\ As set forth in the Pilot Program Release, if the Exchange
were to propose an extension, expansion, or permanent approval of
the Pilot Program, the Exchange must submit, along with any filing
proposing such amendments to the program, a report that provides an
analysis of the Pilot Program covering the entire period during
which the Pilot Program was in effect. See Pilot Program Release,
supra note 5. The Pilot Program Release requires the Exchange to
include in its report, at a minimum: (1) Data and written analysis
on the open interest and trading volume in the classes for which QOS
were opened; (2) an assessment of the appropriateness of the option
classes selected for the Pilot Program; (3) an assessment of the
impact of the Pilot Program on the capacity of the Exchange, OPRA,
and market data vendors (to the extent data from market data vendors
is available); (4) any capacity problems or other problems that
arose during the operation of the Pilot Program and how the Exchange
addressed such problems; (5) any complaints that the Exchange
received during the operation of the Pilot Program and how the
Exchange addressed them; and (6) any additional information that
would assist in assessing the operation of the Pilot Program.
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate the 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-Amex-2008-31 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-Amex-2008-31. 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-Amex-2008-31 and should be
submitted on or before April 25, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-7027 Filed 4-3-08; 8:45 am]
BILLING CODE 8011-01-P
