Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change To List and Trade Options on Reduced Values of the FTSE 100 Index and the FTSE 250 Index, 36945-36950 [E8-14767]
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Federal Register / Vol. 73, No. 126 / Monday, June 30, 2008 / Notices
and credits currently identified as
applicable to transactions in shares
priced below $1.00.
Further, the Exchange will amend
footnote 1 within the Schedule to
explain that trade activity that occurs on
days when the market closes early will
not count towards volume tiers. In this
manner, the Exchange will not
unintentionally penalize an ETP Holder
when it calculates its average daily
volume by including a singularly low
total stemming from a short trading day.
The Exchange will also renumber the
footnotes within the Schedule where
necessary.7
While changes to the Schedule
pursuant to this proposal will be
effective upon filing, the changes will
become operative on July 1, 2008.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with section
6(b) of the Act,8 in general, and furthers
the objectives of section 6(b)(4),9 in
particular, in that it is intended to
provide for the equitable allocation of
reasonable dues, fees, and other charges
among its members and other persons
using its facilities. The Exchange
believes that the proposed fees and
credits are reasonable. The proposed
rates are part of the Exchange’s effort to
attract and enhance participation on the
Exchange, by offering volume-based
incentives. The Exchange also believes
that the proposed changes to the
Schedule are equitable in that they
apply uniformly to their customers.
B. Self Regulatory Organization’s
Statement on Burden on Competition
The Exchange 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 on the proposed
rule change were neither solicited nor
received.
jlentini on PROD1PC65 with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change is
subject to section 19(b)(3)(A)(ii) of the
Act 10 and subparagraph (f)(2) of Rule
7 As part of the reformatting, the Exchange is also
proposing to add grid lines to the Schedule for ease
of review.
8 15 U.S.C. 78f(b).
9 15 U.S.C. 78f(b)(4).
10 15 U.S.C. 78s(b)(3)(A)(ii).
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19b–4 thereunder because it establishes
or changes a due, fee, or other charge
applicable only to a member imposed by
a self-regulatory organization.
Accordingly, the proposal is effective
upon Commission receipt of the filing.
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.11
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–NYSEArca–2008–64 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2008–64. 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 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–2008–64 and
should be submitted on or before July
21, 2008.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–14766 Filed 6–27–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58008; File No. SR–
NYSEArca–2008–61]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and Order
Granting Accelerated Approval of
Proposed Rule Change To List and
Trade Options on Reduced Values of
the FTSE 100 Index and the FTSE 250
Index
June 24, 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 June 19,
2008, NYSE Arca, Inc. (‘‘NYSE Arca’’ or
the ‘‘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
substantially prepared by the Exchange.
This order provides notice of the
proposed rule change and approves it
on an accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
certain Exchange rules to trade options
on reduced values of the FTSE 100
Index and the FTSE 250 Index. The
Exchange also proposes to list and trade
long-term options on reduced values of
the FTSE 100 Index and the FTSE 250
Index. Options on these indexes will be
a.m. cash-settled and will have
European-style exercise provisions.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.nyse.com, at the
12 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
11 15
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U.S.C. 78s(b)(3)(C).
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Federal Register / Vol. 73, No. 126 / Monday, June 30, 2008 / Notices
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. The text of
these statements may be examined at
the places specified in Item III below.
The Exchange has prepared summaries,
set forth in Sections A, B, and C below,
of the most significant aspects of such
statements.
jlentini on PROD1PC65 with NOTICES
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to list and
trade on the Exchange a.m. cash-settled,
European-style, index options on the
FTSE 100 Index and the FTSE 250 Index
(collectively, ‘‘FTSE Indexes’’).
Specifically, the Exchange proposes to
list options based upon one-tenth of the
value of the FTSE Indexes (‘‘Mini FTSE
Indexes’’). In addition to regular options
on the Mini FTSE Indexes, the Exchange
may list long-term options on such
Indexes (‘‘FTSE LEAPS’’).3
The Exchange states that the FTSE
100 Index and the FTSE 250 Index are
internationally recognized,
capitalization-weighted indexes based
on the prices of the most highly
capitalized British stocks traded on the
London Stock Exchange (‘‘LSE’’), a
Recognized Investment Exchange under
the Financial Services and Markets Act
2000 of the U.K and regulated by the
Financial Services Authority (‘‘FSA’’) of
the U.K. The LSE’s Stock Exchange
Electronic Trading Service (‘‘SETS’’) is
a fully electronic order book trading
service. SETS is the central price
formation and trading service for the
securities comprising the FTSE 100
Index, the most liquid FTSE 250
securities, and equities that underlie
EuronextLIFFE (‘‘LIFFE’’) traded equity
options. SETS market maker
(‘‘SETSmm’’) is the LSE’s trading
service for, among others, the FTSE 250
securities that are not traded on SETS.
Currently, LIFFE lists equity options
on the FTSE 100 Index and futures and
futures options on the FTSE 250 Index.
The Exchange notes that the
Commission previously approved for
3 Under
NYSE Arca Rule 5.19(b)(1) ‘‘Index LEAPS
Options Series,’’ the Exchange may list long-term
options that expire from 12 to 60 months from the
date of issuance.
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the Chicago Board Options Exchange
(‘‘CBOE’’) to list reduced-value options
on the FTSE 100 Index, and for the
International Securities Exchange
(‘‘ISE’’) to list reduced value options on
both the FTSE 100 and the FTSE 250.4
Index Design and Composition
The FTSE 100 and 250 Indexes were
created in the 1980s by the International
Stock Exchange of the United Kingdom
and the Republic of Ireland (the
predecessor to the LSE) in conjunction
with the Financial Times and a
committee of U.K. financial institutions,
including LIFFE. The Indexes are
administered and maintained by FTSE
International Limited (‘‘FTSE’’).5 To
qualify for inclusion in a FTSE Index, a
company must satisfy, among others,
the following conditions: (1) It must
have a full listing on the London Stock
Exchange; (2) it must not be a subsidiary
of another FTSE Index constituent; and
(3) it must be sufficiently liquid to be
traded.6 The FTSE 100 Index consists of
the largest 100 U.K. companies ranked
by unadjusted market value, and the
FTSE 250 consists of the next largest
250 U.K. companies ranked by
unadjusted market value.7 The FTSE
EMEA Committee conducts a quarterly
review of the FTSE Indexes to ensure
that its component stocks are
representative of the state of the equity
market for the largest U.K. companies.
As of August 31, 2007, the following
were the characteristics of the FTSE 100
Index: 8 (i) The total capitalization of all
of the components in the Index is £1.50
trillion; (ii) regarding component
capitalization, (a) the highest
4 See Securities Exchange Act Release No. 29722
(September 23, 1991), 56 FR 49807 (October 1,
1991) (order approving SR–CBOE–91–07);
Securities Exchange Act Release No. 53484 (March
14, 2006) 71 FR 14268 (March 21, 2006) (order
approving SR–ISE–2005–25).
5 The FTSE Europe, Middle East and Africa
(‘‘EMEA’’) Committee is responsible for, among
other things, establishing rules to determine,
review, and modify the composition of the FTSE
Indexes, as well as how the FTSE Indexes are
calculated. The FTSE EMEA Committee is
comprised of representatives from various financial
institutions including, among others, FTSE,
Barclays Global Investors, Goldman Sachs, and
LIFFE.
6 See ‘‘Ground Rules for the Management of the
UK Series of the FTSE Actuaries Share Indices,’’ at
https://www.ftse.com for complete eligibility criteria.
7 Unadjusted market capitalization (as opposed to
a ‘‘free-float’’ index methodology) refers to the total
number of shares outstanding multiplied by the
share price. A ‘‘free-float’’ index methodology
usually excludes shares held by strategic investors
by way of cross ownership, government ownership,
private ownership, and restricted share ownership.
8 The Exchange deems information regarding
characteristics of the FTSE 100 accurate as per data
available from various sources, including the FTSE
100 Fact Sheet published by FTSE International
Ltd. and the Bloomberg Financial Web sites.
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capitalization of a component is £107.14
billion (BP Plc), (b) the lowest
capitalization of a component is £861.13
million (Schroders NV), (c) the average
capitalization of the components is
14.70 billion, and (d) the median
capitalization of the components is
£6.02 billion; (iii) regarding component
price per share, (a) the highest price per
share of a component is £44.19 (Rio
Tinto), (b) the lowest price per share of
a component is 101 pence (ITV), (c) the
mean price per share of a component is
£8.60, and (d) the median price per
share of a component is £7.16; (iv)
regarding component weightings, (a) the
highest weighting of a component is
7.14% (BP Plc), (b) the lowest weighting
of a component is 0.04% (Schroders
NV), (c) the mean weighting of the
components is 0.99%, (d) the median
weighting of the components is 0.45%,
and (e) the total weighting of the top
five highest weighted components is
29.36% (BP Plc, HSBC Holdings,
Vodafone Group, GlaxoSmithKline,
Royal Dutch Shell); (v) regarding
component available shares, (a) the most
available shares of a component is 5.03
billion (Vodafone Group), (b) the least
available shares of a component is 66.90
million (Schroders NV), (c) the mean
available shares of the components is
2.97 billion, and (d) the median
available shares of the components is
1.24 billion; (vi) regarding the threemonth average daily volumes of the
components, (a) the highest three-month
average daily volume of a component is
291.648 million (Vodafone Group), (b)
the lowest three-month average daily
volume of a component is 307,521
(Schroders NV), (c) the mean threemonth average daily volume of the
components is 15.77 million, (d) the
median three-month average daily
volume of the components is 8.01
million, (e) the average of three-month
average daily volumes of the five most
heavily traded components is 579.50
million (Vodafone Group, BP Plc, Corus
Group, BT Group, Tesco), and (f) 100%
of the components had a three-month
average daily volume of at least 50,000.
As of August 31, 2007, the following
were the characteristics of the FTSE 250
Index 9: (i) The total capitalization of all
of the components in the Index is
£260.34 billion; (ii) regarding
component capitalization, (a) the
highest capitalization of a component is
£3.97 billion (Taylor Wimpey), (b) the
lowest capitalization of a component is
9 The Exchange deems information regarding
characteristics of the FTSE 250 accurate as per data
available from various sources, including the FTSE
250 Fact Sheet published by FTSE International
Ltd. and Bloomberg Financial Web sites.
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jlentini on PROD1PC65 with NOTICES
£369.09 million (JPM European), (c) the
average capitalization of the
components is £1.03 billion, and (d) the
median capitalization of the
components is £830 million; (iii)
regarding component price per share, (a)
the highest price per share of a
component is £52.93 (Greggs), (b) the
lowest price per share of a component
is 28 pence (PartyGaming), (c) the mean
price per share of a component is £4.60,
and (d) the median price per share of a
component is £5.97; (iv) regarding
component weightings, (a) the highest
weighting of a component is 1.53%
(Taylor Wimpey), (b) the lowest
weighting of a component is 0.06% (JP
Morgan European), (c) the mean
weighting of the components is 0.41%,
(d) the median weighting of the
components is 0.30%, and (e) the total
weighting of the top five highest
weighted components is 6.13% (Taylor
Wimpey, Tulow Oil, First Group,
Ladbrokes, Invensys); (v) regarding
component available shares, (a) the most
available shares of a component is 3.96
billion (PartyGaming), (b) the least
available shares of a component is 16.41
million (Daejan), (c) the mean available
shares of the components is 367.10
million, and (d) the median available
shares of the components is 211.60
million; (vi) regarding the three-month
average daily volumes of the
components, (a) the highest three-month
average daily volume of a component is
30.80 million (PartyGaming), (b) the
lowest three-month average daily
volume of a component is 10,900
(Daejan), (c) the mean three-month
average daily volume of the components
is 2.41 million, (d) the median threemonth average daily volume of the
components is 769,801, (e) the average
of three-month average daily volumes of
the five most heavily traded
components is 97.29 million
(PartyGaming, Bradford & Bingley,
Debenhams, LogicaCMG, and Hays), and
(f) 98% of the components had a threemonth average daily volume of at least
50,000.
Index Calculation and Index
Maintenance
The base index value of the FTSE 100
Index and the FTSE 250 Index, was
1000, as of December 31, 1983, and
1412.60, as of December 31, 1985,
respectively. As of April 17, 2008, the
index value of the FTSE 100 Index and
the FTSE 250 Index was 5980.4 and
10,089.4, respectively. The Exchange
believes that these levels are too high for
successful options trading. As a result,
the premiums for options on the full
values of the FTSE Indexes are high,
which may deter retail investors.
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Accordingly, the Exchange proposes to
base trading in options on a fraction of
the full size FTSE Indexes. In particular,
the Exchange proposes to list Mini FTSE
Index options that are based on onetenth of the value of each of the FTSE
Indexes.10 The Exchange believes that
listing options on reduced values will
attract a greater source of customer
business than if options were based on
the full value of the FTSE Indexes. The
Exchange further believes that listing
options on reduced values will provide
an opportunity for investors to hedge, or
speculate on, the market risk associated
with the stocks comprising the FTSE
Indexes. Additionally, by reducing the
values of the FTSE Indexes, investors
will be able to use this trading vehicle
while extending a smaller outlay of
capital. The Exchange believes that this
should attract additional investors, and,
in turn, create a more active and liquid
trading environment.11
Index levels for options on the Mini
FTSE Indexes are calculated by FTSE,
and are currently disseminated by ISE
every 15 seconds during the Exchange’s
regular trading hours to market
information vendors via the Options
Price Reporting Authority (‘‘OPRA’’).12
In the event ISE no longer disseminates
such index levels, the Exchange will
cause such index levels to be
disseminated via OPRA, the
Consolidated Tape Association, or one
or more major market data vendors. The
methodology used to calculate the value
of the FTSE Indexes is similar to the
methodology used to calculate the value
of other well-known marketcapitalization weighted indexes. The
level of each FTSE Index reflects the
total market value of the component
stocks relative to a particular base
period and is computed by dividing the
total market value of the companies in
each index by its respective index
divisor.13
10 As noted above, the Exchange also proposes to
list LEAPS on the Mini FTSE Indexes.
11 The concept of listing reduced value options on
an index is not a novel one. For example, the
Commission has previously approved the listing of
reduced value options on the S&P 500 Index, the
NASDAQ 100 Index, and the NYSE Composite
Index. See Securities Exchange Act Release Nos.
32893 (September 14, 1993), 58 FR 49070
(September 21, 1993) (S&P 500 Index); and 48681
(October 22, 2003), 68 FR 62337 (November 3, 2003)
(NYSE Composite Index). See also Securities
Exchange Act Release No. 43000 (June 30, 2000), 65
FR 42409 (July 10, 2000) (relating to a reduction in
the value of the NASDAQ 100 Index).
12 The FTSE Indexes will be published daily
through major quotation vendors, such as Reuters.
13 A divisor is an arbitrary number chosen at the
starting date of an index to fix the index starting
value. The divisor is adjusted periodically when
capitalization amendments are made to the
constituents of the index in order to allow the index
value to remain comparable over time. Without a
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The FTSE Indexes are updated on a
real-time basis from 8 a.m. to 4:30 p.m.
(London time), which corresponds to 3
a.m. to 11:30 a.m. (New York time).
After 11:30 a.m. (New York time), OPRA
disseminates a static value of the FTSE
Indexes until the close of trading each
day. The FTSE Indexes are calculated
using the last traded price of the
component securities. If a component
security does not open for trading, the
price of that security at the close or the
index on the previous day is used in the
calculation.14
The FTSE Indexes will be monitored
and maintained by FTSE. FTSE will be
responsible for making all necessary
adjustments to the indexes to reflect
component deletions, share changes,
stock splits, stock dividends (other than
an ordinary cash dividend), and stock
price adjustments due to restructuring,
mergers, or spin-offs involving the
underlying components. Some corporate
actions, such as stock splits and stock
dividends, require simple changes to the
available shares outstanding and the
stock prices of the underlying
components. Other corporate actions,
such as share issuances, that change the
market value would require changing
the index divisor to effect adjustments.
The FTSE Indexes are reviewed each
quarter in March, June, September, and
December based on market
capitalization. Based on information
submitted by FTSE, the FTSE EMEA
Committee approves the new index
components and a reserve list of six
companies for the FTSE 100 Index. If a
company is deleted from the FTSE 100
Index between reviews as a result of a
merger, takeover, or other corporate
action, the highest ranking company
from the reserve list will replace it in
the index.
Although the Exchange is not
involved in the maintenance of any of
the FTSE Indexes, the Exchange
represents that it will monitor each
FTSE Index on a quarterly basis. The
Exchange will not list any additional
series for trading and will limit all
transactions in such options to closing
transactions only if, with respect to any
FTSE Index: (i) The number of securities
in a FTSE Index drops by one-third or
more; (ii) 10% or more of the weight of
a FTSE Index is represented by
component securities having a market
divisor the index value would change when
corporate actions took place and would not reflect
the true value of an underlying portfolio upon
which the index is based.
14 The FTSE Indexes are published daily in the
Financial Times and are available in real-time on
Reuters, Bloomberg, and other market information
systems which disseminate information on a realtime basis.
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jlentini on PROD1PC65 with NOTICES
value of less than $50 million; (iii) 10%
or more of the weight of a FTSE Index
is represented by component securities
trading less than 20,000 shares per day;
or (iv) the largest component security
accounts for more than 15% of the
weight of a FTSE Index or the largest
five components in the aggregate
account for more than 50% of the
weight of a FTSE Index. As of May 15,
2008, the FTSE Indexes comply with
these criteria.
In the event the FTSE Indexes cease
to be maintained or calculated, or their
values are not disseminated every 15
seconds by a widely available source,
the Exchange will not list any additional
series for trading and will limit all
transactions in such options to closing
transactions only for the purpose of
maintaining a fair and orderly market
and protecting investors.
Exercise and Settlement Value
Options on the FTSE Indexes will
expire on the Saturday following the
third Friday of the expiration month.
Trading in the FTSE Indexes will
normally cease at 4:15 p.m. (New York
time) on the Thursday preceding an
expiration Saturday. The index value for
exercise of the FTSE Index options will
be calculated based on the LSE’s
Exchange Delivery Settlement Price
(‘‘EDSP’’) intra-day auction, which was
introduced by LSE in November of
2004. The EDSP is a settlement value
calculated by Euronext-LIFFE for FTSE
index futures and options contracts
traded on its exchange. The EDSP value
is calculated using an intra-day auction
process administered by the LSE for all
the component stocks of the FTSE 100
Index and the FTSE 250 Index. The
intra-day auction occurs between 10:10
a.m. and 10:29 a.m. (London time) for
the FTSE 100 Index, and between 10:10
a.m. and 10:31 a.m. (London time) for
the FTSE 250 Index on the third Friday
of the expiration month. Therefore,
because trading in the expiring contract
months will normally cease on a
Thursday at 4:15 p.m. (New York time),
the EDSP for exercise will be
determined the day after trading has
ceased, i.e., during the Friday morning
LSE trading session, by 5:31 a.m. (New
York time). The last automated traded
price prior to the EDSP auction or the
previous day’s closing price will be
used to calculate the final EDSP if a
security did not participate in the
auction. During the auction process,
indications of the settlement price for
each index are widely disseminated
every 15 seconds via special indexes
called Expiry Indexes. The purpose of
the Expiry Indexes is to disseminate
expected settlement values as the
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auction progresses. When the auction is
finished, the final values of the Expiry
Indexes are disseminated as the EDSP
values. The Expiry Indexes and
subsequent EDSP values are widely
disseminated through major market data
vendors including Reuters, Bloomberg,
and Thomson.
If the LSE is closed on the Friday
before expiration, but the Exchange
remains open, then the last trading day
for expiring FTSE Index options will be
moved earlier to Wednesday as if the
Exchange had had a Friday holiday. The
settlement index value used for exercise
will be calculated during LSE’s EDSP
intra-day auction on Thursday morning.
Contract Specifications
The contract specifications for options
on the FTSE Indexes are set forth in
Exhibits 3–1 and 3–2 to the proposed
rule change. The FTSE Indexes are
broad-based indexes, as defined in
NYSE Arca Rule 5.12. Options on the
FTSE Indexes are European-style and
a.m. cash-settled. The Exchange’s
standard trading hours for broad-based
index options (6:30 a.m. to 1:15 p.m.,
Pacific time), as set forth in Rule 7.1,
will apply to the FTSE Indexes.
Exchange rules that are applicable to the
trading of options on broad-based
indexes will apply to the reduced values
of the FTSE Indexes.15 Specifically, the
trading of reduced values of the FTSE
Indexes will be subject to, among others,
Exchange rules governing margin
requirements and trading halt
procedures for index options. Options
shall be quoted and traded in U.S.
dollars.
For options on the Mini FTSE
Indexes, the Exchange proposes to
amend Rule 5.15 to state that all broadbased index options contracts shall be
subject to a contract limitation fixed by
the Exchange, which shall not be larger
than the limits provided in the chart
included in Rule 5.15. The proposed
amended Rule 5.15 would establish
aggregate position limits for options on
the Mini FTSE Indexes at 250,000
contracts on the same side of the
market, provided no more than 150,000
of such contracts are in the nearest
expiration month series. Additionally,
the Exchange proposes to amend NYSE
Arca Rule 5.17 relating to the
availability of an index option hedge
exemption for public customers. The
proposed rule change would specify
that, for options on broad-based indexes
other than for those that do not have any
position limits, the hedge exemption is
75,000 contracts in addition to the
15 See
PO 00000
NYSE Arca Rule 5.12.
Frm 00112
Fmt 4703
Sfmt 4703
standard limit.16 Furthermore,
proprietary accounts of members may
receive an exemption of up to 500,000
contracts for the purpose of facilitating
public customer orders.17
The Exchange proposes to apply
broad-based index margin requirements
for the purchase and sale of options on
the Mini FTSE Indexes. Accordingly,
purchases of put or call options with 9
months or less until expiration must be
paid for in full. Writers of uncovered
put or call options must deposit/
maintain 100% of the option proceeds,
plus 15% of the aggregate contract value
(current index level x $100), less any
out-of-the-money amount, subject to a
minimum of the option proceeds plus
10% of the aggregate contract value for
call options and a minimum of the
option proceeds plus 10% of the
aggregate exercise price amount for put
options.
The Exchange proposes to set strike
price intervals at least 21⁄2 points for
certain near-the-money series in nearterm expiration months when the index
level of the FTSE Indexes is below 200,
and 5-point strike price intervals for
other options series with expirations up
to one year, and at least 10-point strike
price intervals for longer-term options.
The minimum tick size for series trading
below $3 shall be $0.05, and for series
trading at or above $3, the minimum
tick size shall be $0.10.
The Exchange proposes to list options
on reduced values of the FTSE Indexes
in the three consecutive near-term
expiration months plus up to three
successive expiration months in the
March cycle. For example, consecutive
expirations of January, February, March,
plus June, September, and December
expirations would be listed.18 In
addition, long-term option series having
up to sixty months to expiration may be
traded.19 The trading of long-term FTSE
Indexes shall be subject to the same
rules that govern the trading of all the
Exchange’s index options, including
sales practice rules, margin
requirements, and trading rules.
Options on the Mini FTSE Indexes
shall be subject to the same rules that
presently govern the trading of
Exchange index options, including sales
practice rules, margin requirements,
trading rules, and position and exercise
limits.
The Exchange proposes to amend
Rule 5.19(a)(7)(A) to specify Mini FTSE
16 The same limits that apply to position limits
shall apply to exercise limits for these products.
17 See NYSE Arca Rule 6.8, Commentary .08.
18 See NYSE Arca Rule 5.19(a)(3).
19 See NYSE Arca Rule 5.19(b)(1). The Exchange
is not listing reduced value LEAPS on the FTSE
Indexes pursuant to NYSE Arca Rule 5.19(b)(2).
E:\FR\FM\30JNN1.SGM
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Federal Register / Vol. 73, No. 126 / Monday, June 30, 2008 / Notices
Index options as a.m.-settled options
approved for trading on the Exchange.
The Exchange also proposes to add
Commentary .01 to Rule 5.22
(Disclaimers) to specify that FTSE
International Limited is the reporting
authority for the FTSE 100 and 250
Indexes.
jlentini on PROD1PC65 with NOTICES
Surveillance and Capacity
The Exchange represents that it has an
adequate surveillance program in place
for options traded on the FTSE Indexes
and intends to apply those same
program procedures that it applies to
the Exchange’s other index options.
Additionally, the Exchange has
provided the Commission, on a
confidential basis, a representation
made by FTSE to the Exchange
regarding FTSE’s insider trading
policies, as they pertain to the brokerdealer members of FTSE’s EMEA
Committee who are charged with the
selection of component securities that
comprise the FTSE Indexes. The FTSE
EMEA Committee members are also
required to maintain in confidence,
including non-disclosure to another
party, any information that they may be
given by virtue of their membership of
the FTSE EMEA Committee, unless such
information is already in the public
domain or where disclosure is required
by law. NYSE Arca is also a member of
the Intermarket Surveillance Group
(ISG). The members of the ISG include
all of the U.S. registered stock and
options markets. In addition, the LSE
and LIFFE are members of ISG. ISG
members work together to coordinate
surveillance and investigative
information sharing in the stock and
options markets. In addition, the major
futures exchanges are members of the
ISG, which allows for the sharing of
surveillance information for potential
intermarket trading abuses.
The Exchange has the necessary
systems capacity to support new options
series that will result from the
introduction of reduced values of the
FTSE Indexes, including LEAPS. The
Exchange has provided the Commission
system capacity information that
supports its system capacity
representations.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with and
furthers the objectives of Section 6(b)(5)
of the Act,20 in that it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to remove
impediments to, and perfect the
20 15
U.S.C. 78f(b)(5).
VerDate Aug<31>2005
16:15 Jun 27, 2008
Jkt 214001
mechanism of, a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. The Exchange believes
that the proposed rule change will
provide for additional competition in
the U.S. options markets in trading
FTSE Index options, to the benefit of the
investing public.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange 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
No written comments were solicited
or received with respect to the proposed
rule change.
36949
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–NYSEArca–2008–61 and
should be submitted on or before July
21, 2008.
IV. Commission’s Findings and Order
Granting Accelerated Approval of the
Proposed Rule Change
After careful consideration, the
Commission finds that the proposed
rule change is consistent with the
III. Solicitation of Comments
requirements of the Act and the rules
Interested persons are invited to
and regulations thereunder applicable to
submit written data, views, and
a national securities exchange.21 In
arguments concerning the foregoing,
particular, the Commission finds that
including whether the proposed rule
the proposed rule change is consistent
change is consistent with the Act.
with Section 6(b) of the Act,22 in
Comments may be submitted by any of
general, and furthers the objectives of
the following methods:
Section 6(b)(5),23 in particular, in that it
is designed to promote just and
Electronic Comments
equitable principles of trade, to remove
• Use the Commission’s Internet
impediments to and perfect the
comment form (https://www.sec.gov/
mechanism of a free and open market
rules/sro.shtml); or
and a national market system, and, in
• Send an e-mail to rulegeneral to protect investors and the
comments@sec.gov. Please include File
public interest.
Number SR–NYSEArca–2008–61 on the
Because the FTSE 100 and FTSE 250
subject line.
Indexes are broad-based indexes of
actively traded, well-capitalized stocks,
Paper Comments
the trading of the proposed Index
• Send paper comments in triplicate
options on the Exchange does not raise
to Secretary, Securities and Exchange
unique regulatory concerns. The options
Commission, 100 F Street, NE.,
on the Mini FTSE Indexes will be traded
Washington, DC 20549–1090.
under NYSE Arca’s existing regulatory
All submissions should refer to File
regime for index options, which
Number SR–NYSEArca–2008–61. This
includes among other things, positions
file number should be included on the
and exercise limits and margin
subject line if e-mail is used. To help the requirements. Additionally, the
Commission process and review your
Exchange has represented that it has
comments more efficiently, please use
adequate system capacity and
only one method. The Commission will surveillance for these Index options and
post all comments on the Commission’s that the index value will be
disseminated at least every 15 seconds.
Internet Web site (https://www.sec.gov/
In addition, as ISG members, NYSE
rules/sro.shtml). Copies of the
Arca, LSE, and LIFFE work together to
submission, all subsequent
coordinate surveillance and investigate
amendments, all written statements
information sharing in the stock and
with respect to the proposed rule
options markets.
change that are filed with the
Commission, and all written
21 In approving this proposal, the Commission
communications relating to the
notes that it has considered the proposal’s impact
proposed rule change between the
on efficiency, competition, and capital formation.
Commission and any person, other than See 15 U.S.C. 78c(f).
22 15 U.S.C. 78f(b).
those that may be withheld from the
23 15 U.S.C. 78f(b)(5).
public in accordance with the
PO 00000
Frm 00113
Fmt 4703
Sfmt 4703
E:\FR\FM\30JNN1.SGM
30JNN1
36950
Federal Register / Vol. 73, No. 126 / Monday, June 30, 2008 / Notices
Under Section 19(b)(2) of the Act,24
the Commission may not approve any
proposed rule change prior to the
thirtieth day after publication of the
notice of the filing thereof, unless the
Commission find good cause for so
doing and publishes its reasons for so
finding. The Commission believes that
the proposed rule filing does not raise
any new, unique or substantive issues
from those raised in similar proposals
previously approved the Commission,25
allowing other exchanges to list and
trade reduced value index options on
the FTSE Indexes. Accordingly, the
Commission hereby finds good cause for
approving the proposed rule change
thereto prior to thirtieth day after the
date of publication of notice of filings
thereof in the Federal Register.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,26 that the
proposed rule change (SR–NYSEArca–
2008–61) be, and it hereby is, approved
on an accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–14767 Filed 6–27–08; 8:45 am]
BILLING CODE 8010–01–P
SMALL BUSINESS ADMINISTRATION
Community Express Pilot Program
U.S. Small Business
Administration (SBA).
ACTION: Notice of Plan to Extend and
Restructure the Community Express
Pilot Program.
AGENCY:
SUMMARY: This notice extends the
Community Express Pilot Program in its
current form through September 30,
2008 and announces SBA’s plan to
restructure the program. The
restructured Community Express will be
effective October 1, 2008 to provide
SBA’s lending partners a transition
period to implement the changes and to
accommodate any Community Express
loan applications lenders may have in
process. This notice also extends the
Community Express Pilot Program
through December 31, 2009. Finally,
this notice reminds SBA’s participating
jlentini on PROD1PC65 with NOTICES
24 15
U.S.C. 78s(b)(2).
Securities Exchange Act Release No. 29722
(September 23, 1991), 56 FR 49807 (October 1,
1991) (order approving SR–CBOE–91–07); 53484
(March 14, 2006), 71 FR 14268 (March 21, 2006)
(order approving SR–ISE–2005–25).
26 15 U.S.C. 78s(b)(2).
27 17 CFR 200.30–3(a)(12).
25 See
VerDate Aug<31>2005
16:15 Jun 27, 2008
Jkt 214001
lenders of the statutory limitation on the
number of loans SBA can process under
a pilot program.
DATES: The Community Express Pilot
Loan Program is extended in its current
form through September 30, 2008. The
effective date of the changes to
Community Express is October 1, 2008,
and SBA is extending the restructured
Community Express as a pilot program
through December 31, 2009.
FOR FURTHER INFORMATION CONTACT:
Charles Thomas, Office of Financial
Assistance, U.S. Small Business
Administration, 409 Third Street, SW.,
Washington, DC 20416; Telephone (202)
205–6490; charles.thomas@sba.gov.
SUPPLEMENTARY INFORMATION: The
Community Express Pilot Program was
established in 1999 based on the
Agency’s SBA Express Program. Lenders
approved for participation in
Community Express are authorized to
use the expedited loan processing
procedures in place for SBA Express,
but the loans approved under
Community Express must be to
distressed or underserved markets. In
addition, participating lenders must
arrange and, when necessary, pay for
appropriate management and technical
assistance for their Community Express
borrowers. To encourage lenders to
make these loans, SBA provides its
standard 75–85 percent guaranty, which
contrasts with the 50 percent guaranty
the Agency provides under SBA
Express. The maximum loan amount
under this pilot program is $250,000.
Following extensive internal analysis
and discussion, as well as discussions
with SBA’s lending partners, SBA is
restructuring and enhancing the
Community Express Pilot Program to
improve its management,
administration, oversight, and delivery.
Through this notice, SBA is extending
the Community Express Pilot Program
in its current form through September
30, 2008. Also, SBA is providing its
lending partners with advance
notification of the key features of the
restructured Community Express Pilot
Program and SBA’s plans for
implementing the restructured program,
including the publication of procedural
guidance and the availability of a
transition period for lenders.
Under the restructured Community
Express Pilot Program, borrower
eligibility will be more clearly defined.
First, small businesses whose principal
office (as defined in 13 CFR 126.103) is
located in a HUBZone or Community
Reinvestment Act (CRA) area will be
eligible for Community Express. These
geographic areas are easily identifiable
and searchable through Web-based
PO 00000
Frm 00114
Fmt 4703
Sfmt 4703
facilities available through the Internet.
Second, loans of $25,000 or less
regardless of where the principal office
of the business is located will be eligible
for Community Express. Third, loans
made under SBA Headquarters
approved special market initiatives
designed to support local community/
economic development will be eligible
for Community Express.
In addition, SBA is retaining the
technical assistance (T/A) requirement
of Community Express, but giving
lenders the option to use SBA’s new
online Small Business Training Network
(SBTN) and other SBA T/A resources to
meet the program’s requirements.
Lenders will continue to be required to
document in their loan file the T/A
received by the borrower.
With the availability of SBA’s SBTN
and SBA’s other T/A resources and with
the Agency’s higher 75–85 percent
guaranty, the maximum interest rate
lenders may charge for Community
Express loans will be limited to the rate
applicable under standard 7(a). Under
standard 7(a), lenders may charge
interest rates up to Prime plus 2.25
percent for loans with maturities of less
than seven years and Prime plus 2.75
percent for loans with maturities that
are seven years or greater. Lenders may
charge rates 2 percent higher for loans
of $25,000 or less and 1 percent higher
for loans between $25,000 and $50,000.
SBA will publish detailed procedural
guidance on the program’s changes in
coming weeks, which will be followed
by lender support and training through
its district offices. To assist lenders in
understanding and implementing the
restructured Community Express Pilot
Program and to accommodate
Community Express loan applications
that lenders may already have in
process, SBA will delay implementation
of the changes until October 1, 2008.
But, as of October 1, 2008, all
Community Express loans must conform
to the requirements and procedures of
the restructured Community Express
Pilot Program.
Community Express is being extended
as a pilot program until December 31,
2009, which will allow SBA time to
fully evaluate the results of these
changes.
Because Community Express is a pilot
program, SBA must ensure that it
complies with Section 7(a)(25) of the
Small Business Act, which prohibits the
Agency from approving under any 7(a)
pilot loan program more than 10 percent
of the total number of 7(a) loans SBA
approves in any fiscal year. During the
early months of Fiscal Year 2008, SBA
received loan guaranty requests under
Community Express at a volume that
E:\FR\FM\30JNN1.SGM
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]]>Agencies
[Federal Register Volume 73, Number 126 (Monday, June 30, 2008)]
[Notices]
[Pages 36945-36950]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-14767]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58008; File No. SR-NYSEArca-2008-61]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Order Granting Accelerated Approval of Proposed Rule Change To List
and Trade Options on Reduced Values of the FTSE 100 Index and the FTSE
250 Index
June 24, 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 June 19, 2008, NYSE Arca, Inc. (``NYSE Arca'' or the
``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 substantially prepared by the Exchange.
This order provides notice of the proposed rule change and approves it
on an accelerated basis.
---------------------------------------------------------------------------
\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
The Exchange proposes to amend certain Exchange rules to trade
options on reduced values of the FTSE 100 Index and the FTSE 250 Index.
The Exchange also proposes to list and trade long-term options on
reduced values of the FTSE 100 Index and the FTSE 250 Index. Options on
these indexes will be a.m. cash-settled and will have European-style
exercise provisions.
The text of the proposed rule change is available on the Exchange's
Web site at https://www.nyse.com, at the
[[Page 36946]]
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. The
text of these statements may be examined at the places specified in
Item III 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade on the Exchange a.m. cash-
settled, European-style, index options on the FTSE 100 Index and the
FTSE 250 Index (collectively, ``FTSE Indexes''). Specifically, the
Exchange proposes to list options based upon one-tenth of the value of
the FTSE Indexes (``Mini FTSE Indexes''). In addition to regular
options on the Mini FTSE Indexes, the Exchange may list long-term
options on such Indexes (``FTSE LEAPS'').\3\
---------------------------------------------------------------------------
\3\ Under NYSE Arca Rule 5.19(b)(1) ``Index LEAPS Options
Series,'' the Exchange may list long-term options that expire from
12 to 60 months from the date of issuance.
---------------------------------------------------------------------------
The Exchange states that the FTSE 100 Index and the FTSE 250 Index
are internationally recognized, capitalization-weighted indexes based
on the prices of the most highly capitalized British stocks traded on
the London Stock Exchange (``LSE''), a Recognized Investment Exchange
under the Financial Services and Markets Act 2000 of the U.K and
regulated by the Financial Services Authority (``FSA'') of the U.K. The
LSE's Stock Exchange Electronic Trading Service (``SETS'') is a fully
electronic order book trading service. SETS is the central price
formation and trading service for the securities comprising the FTSE
100 Index, the most liquid FTSE 250 securities, and equities that
underlie EuronextLIFFE (``LIFFE'') traded equity options. SETS market
maker (``SETSmm'') is the LSE's trading service for, among others, the
FTSE 250 securities that are not traded on SETS.
Currently, LIFFE lists equity options on the FTSE 100 Index and
futures and futures options on the FTSE 250 Index. The Exchange notes
that the Commission previously approved for the Chicago Board Options
Exchange (``CBOE'') to list reduced-value options on the FTSE 100
Index, and for the International Securities Exchange (``ISE'') to list
reduced value options on both the FTSE 100 and the FTSE 250.\4\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 29722 (September 23,
1991), 56 FR 49807 (October 1, 1991) (order approving SR-CBOE-91-
07); Securities Exchange Act Release No. 53484 (March 14, 2006) 71
FR 14268 (March 21, 2006) (order approving SR-ISE-2005-25).
---------------------------------------------------------------------------
Index Design and Composition
The FTSE 100 and 250 Indexes were created in the 1980s by the
International Stock Exchange of the United Kingdom and the Republic of
Ireland (the predecessor to the LSE) in conjunction with the Financial
Times and a committee of U.K. financial institutions, including LIFFE.
The Indexes are administered and maintained by FTSE International
Limited (``FTSE'').\5\ To qualify for inclusion in a FTSE Index, a
company must satisfy, among others, the following conditions: (1) It
must have a full listing on the London Stock Exchange; (2) it must not
be a subsidiary of another FTSE Index constituent; and (3) it must be
sufficiently liquid to be traded.\6\ The FTSE 100 Index consists of the
largest 100 U.K. companies ranked by unadjusted market value, and the
FTSE 250 consists of the next largest 250 U.K. companies ranked by
unadjusted market value.\7\ The FTSE EMEA Committee conducts a
quarterly review of the FTSE Indexes to ensure that its component
stocks are representative of the state of the equity market for the
largest U.K. companies.
---------------------------------------------------------------------------
\5\ The FTSE Europe, Middle East and Africa (``EMEA'') Committee
is responsible for, among other things, establishing rules to
determine, review, and modify the composition of the FTSE Indexes,
as well as how the FTSE Indexes are calculated. The FTSE EMEA
Committee is comprised of representatives from various financial
institutions including, among others, FTSE, Barclays Global
Investors, Goldman Sachs, and LIFFE.
\6\ See ``Ground Rules for the Management of the UK Series of
the FTSE Actuaries Share Indices,'' at https://www.ftse.com for
complete eligibility criteria.
\7\ Unadjusted market capitalization (as opposed to a ``free-
float'' index methodology) refers to the total number of shares
outstanding multiplied by the share price. A ``free-float'' index
methodology usually excludes shares held by strategic investors by
way of cross ownership, government ownership, private ownership, and
restricted share ownership.
---------------------------------------------------------------------------
As of August 31, 2007, the following were the characteristics of
the FTSE 100 Index: \8\ (i) The total capitalization of all of the
components in the Index is [pound]1.50 trillion; (ii) regarding
component capitalization, (a) the highest capitalization of a component
is [pound]107.14 billion (BP Plc), (b) the lowest capitalization of a
component is [pound]861.13 million (Schroders NV), (c) the average
capitalization of the components is 14.70 billion, and (d) the median
capitalization of the components is [pound]6.02 billion; (iii)
regarding component price per share, (a) the highest price per share of
a component is [pound]44.19 (Rio Tinto), (b) the lowest price per share
of a component is 101 pence (ITV), (c) the mean price per share of a
component is [pound]8.60, and (d) the median price per share of a
component is [pound]7.16; (iv) regarding component weightings, (a) the
highest weighting of a component is 7.14% (BP Plc), (b) the lowest
weighting of a component is 0.04% (Schroders NV), (c) the mean
weighting of the components is 0.99%, (d) the median weighting of the
components is 0.45%, and (e) the total weighting of the top five
highest weighted components is 29.36% (BP Plc, HSBC Holdings, Vodafone
Group, GlaxoSmithKline, Royal Dutch Shell); (v) regarding component
available shares, (a) the most available shares of a component is 5.03
billion (Vodafone Group), (b) the least available shares of a component
is 66.90 million (Schroders NV), (c) the mean available shares of the
components is 2.97 billion, and (d) the median available shares of the
components is 1.24 billion; (vi) regarding the three-month average
daily volumes of the components, (a) the highest three-month average
daily volume of a component is 291.648 million (Vodafone Group), (b)
the lowest three-month average daily volume of a component is 307,521
(Schroders NV), (c) the mean three-month average daily volume of the
components is 15.77 million, (d) the median three-month average daily
volume of the components is 8.01 million, (e) the average of three-
month average daily volumes of the five most heavily traded components
is 579.50 million (Vodafone Group, BP Plc, Corus Group, BT Group,
Tesco), and (f) 100% of the components had a three-month average daily
volume of at least 50,000.
---------------------------------------------------------------------------
\8\ The Exchange deems information regarding characteristics of
the FTSE 100 accurate as per data available from various sources,
including the FTSE 100 Fact Sheet published by FTSE International
Ltd. and the Bloomberg Financial Web sites.
---------------------------------------------------------------------------
As of August 31, 2007, the following were the characteristics of
the FTSE 250 Index \9\: (i) The total capitalization of all of the
components in the Index is [pound]260.34 billion; (ii) regarding
component capitalization, (a) the highest capitalization of a component
is [pound]3.97 billion (Taylor Wimpey), (b) the lowest capitalization
of a component is
[[Page 36947]]
[pound]369.09 million (JPM European), (c) the average capitalization of
the components is [pound]1.03 billion, and (d) the median
capitalization of the components is [pound]830 million; (iii) regarding
component price per share, (a) the highest price per share of a
component is [pound]52.93 (Greggs), (b) the lowest price per share of a
component is 28 pence (PartyGaming), (c) the mean price per share of a
component is [pound]4.60, and (d) the median price per share of a
component is [pound]5.97; (iv) regarding component weightings, (a) the
highest weighting of a component is 1.53% (Taylor Wimpey), (b) the
lowest weighting of a component is 0.06% (JP Morgan European), (c) the
mean weighting of the components is 0.41%, (d) the median weighting of
the components is 0.30%, and (e) the total weighting of the top five
highest weighted components is 6.13% (Taylor Wimpey, Tulow Oil, First
Group, Ladbrokes, Invensys); (v) regarding component available shares,
(a) the most available shares of a component is 3.96 billion
(PartyGaming), (b) the least available shares of a component is 16.41
million (Daejan), (c) the mean available shares of the components is
367.10 million, and (d) the median available shares of the components
is 211.60 million; (vi) regarding the three-month average daily volumes
of the components, (a) the highest three-month average daily volume of
a component is 30.80 million (PartyGaming), (b) the lowest three-month
average daily volume of a component is 10,900 (Daejan), (c) the mean
three-month average daily volume of the components is 2.41 million, (d)
the median three-month average daily volume of the components is
769,801, (e) the average of three-month average daily volumes of the
five most heavily traded components is 97.29 million (PartyGaming,
Bradford & Bingley, Debenhams, LogicaCMG, and Hays), and (f) 98% of the
components had a three-month average daily volume of at least 50,000.
---------------------------------------------------------------------------
\9\ The Exchange deems information regarding characteristics of
the FTSE 250 accurate as per data available from various sources,
including the FTSE 250 Fact Sheet published by FTSE International
Ltd. and Bloomberg Financial Web sites.
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Index Calculation and Index Maintenance
The base index value of the FTSE 100 Index and the FTSE 250 Index,
was 1000, as of December 31, 1983, and 1412.60, as of December 31,
1985, respectively. As of April 17, 2008, the index value of the FTSE
100 Index and the FTSE 250 Index was 5980.4 and 10,089.4, respectively.
The Exchange believes that these levels are too high for successful
options trading. As a result, the premiums for options on the full
values of the FTSE Indexes are high, which may deter retail investors.
Accordingly, the Exchange proposes to base trading in options on a
fraction of the full size FTSE Indexes. In particular, the Exchange
proposes to list Mini FTSE Index options that are based on one-tenth of
the value of each of the FTSE Indexes.\10\ The Exchange believes that
listing options on reduced values will attract a greater source of
customer business than if options were based on the full value of the
FTSE Indexes. The Exchange further believes that listing options on
reduced values will provide an opportunity for investors to hedge, or
speculate on, the market risk associated with the stocks comprising the
FTSE Indexes. Additionally, by reducing the values of the FTSE Indexes,
investors will be able to use this trading vehicle while extending a
smaller outlay of capital. The Exchange believes that this should
attract additional investors, and, in turn, create a more active and
liquid trading environment.\11\
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\10\ As noted above, the Exchange also proposes to list LEAPS on
the Mini FTSE Indexes.
\11\ The concept of listing reduced value options on an index is
not a novel one. For example, the Commission has previously approved
the listing of reduced value options on the S&P 500 Index, the
NASDAQ 100 Index, and the NYSE Composite Index. See Securities
Exchange Act Release Nos. 32893 (September 14, 1993), 58 FR 49070
(September 21, 1993) (S&P 500 Index); and 48681 (October 22, 2003),
68 FR 62337 (November 3, 2003) (NYSE Composite Index). See also
Securities Exchange Act Release No. 43000 (June 30, 2000), 65 FR
42409 (July 10, 2000) (relating to a reduction in the value of the
NASDAQ 100 Index).
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Index levels for options on the Mini FTSE Indexes are calculated by
FTSE, and are currently disseminated by ISE every 15 seconds during the
Exchange's regular trading hours to market information vendors via the
Options Price Reporting Authority (``OPRA'').\12\ In the event ISE no
longer disseminates such index levels, the Exchange will cause such
index levels to be disseminated via OPRA, the Consolidated Tape
Association, or one or more major market data vendors. The methodology
used to calculate the value of the FTSE Indexes is similar to the
methodology used to calculate the value of other well-known market-
capitalization weighted indexes. The level of each FTSE Index reflects
the total market value of the component stocks relative to a particular
base period and is computed by dividing the total market value of the
companies in each index by its respective index divisor.\13\
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\12\ The FTSE Indexes will be published daily through major
quotation vendors, such as Reuters.
\13\ A divisor is an arbitrary number chosen at the starting
date of an index to fix the index starting value. The divisor is
adjusted periodically when capitalization amendments are made to the
constituents of the index in order to allow the index value to
remain comparable over time. Without a divisor the index value would
change when corporate actions took place and would not reflect the
true value of an underlying portfolio upon which the index is based.
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The FTSE Indexes are updated on a real-time basis from 8 a.m. to
4:30 p.m. (London time), which corresponds to 3 a.m. to 11:30 a.m. (New
York time). After 11:30 a.m. (New York time), OPRA disseminates a
static value of the FTSE Indexes until the close of trading each day.
The FTSE Indexes are calculated using the last traded price of the
component securities. If a component security does not open for
trading, the price of that security at the close or the index on the
previous day is used in the calculation.\14\
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\14\ The FTSE Indexes are published daily in the Financial Times
and are available in real-time on Reuters, Bloomberg, and other
market information systems which disseminate information on a real-
time basis.
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The FTSE Indexes will be monitored and maintained by FTSE. FTSE
will be responsible for making all necessary adjustments to the indexes
to reflect component deletions, share changes, stock splits, stock
dividends (other than an ordinary cash dividend), and stock price
adjustments due to restructuring, mergers, or spin-offs involving the
underlying components. Some corporate actions, such as stock splits and
stock dividends, require simple changes to the available shares
outstanding and the stock prices of the underlying components. Other
corporate actions, such as share issuances, that change the market
value would require changing the index divisor to effect adjustments.
The FTSE Indexes are reviewed each quarter in March, June,
September, and December based on market capitalization. Based on
information submitted by FTSE, the FTSE EMEA Committee approves the new
index components and a reserve list of six companies for the FTSE 100
Index. If a company is deleted from the FTSE 100 Index between reviews
as a result of a merger, takeover, or other corporate action, the
highest ranking company from the reserve list will replace it in the
index.
Although the Exchange is not involved in the maintenance of any of
the FTSE Indexes, the Exchange represents that it will monitor each
FTSE Index on a quarterly basis. The Exchange will not list any
additional series for trading and will limit all transactions in such
options to closing transactions only if, with respect to any FTSE
Index: (i) The number of securities in a FTSE Index drops by one-third
or more; (ii) 10% or more of the weight of a FTSE Index is represented
by component securities having a market
[[Page 36948]]
value of less than $50 million; (iii) 10% or more of the weight of a
FTSE Index is represented by component securities trading less than
20,000 shares per day; or (iv) the largest component security accounts
for more than 15% of the weight of a FTSE Index or the largest five
components in the aggregate account for more than 50% of the weight of
a FTSE Index. As of May 15, 2008, the FTSE Indexes comply with these
criteria.
In the event the FTSE Indexes cease to be maintained or calculated,
or their values are not disseminated every 15 seconds by a widely
available source, the Exchange will not list any additional series for
trading and will limit all transactions in such options to closing
transactions only for the purpose of maintaining a fair and orderly
market and protecting investors.
Exercise and Settlement Value
Options on the FTSE Indexes will expire on the Saturday following
the third Friday of the expiration month. Trading in the FTSE Indexes
will normally cease at 4:15 p.m. (New York time) on the Thursday
preceding an expiration Saturday. The index value for exercise of the
FTSE Index options will be calculated based on the LSE's Exchange
Delivery Settlement Price (``EDSP'') intra-day auction, which was
introduced by LSE in November of 2004. The EDSP is a settlement value
calculated by Euronext-LIFFE for FTSE index futures and options
contracts traded on its exchange. The EDSP value is calculated using an
intra-day auction process administered by the LSE for all the component
stocks of the FTSE 100 Index and the FTSE 250 Index. The intra-day
auction occurs between 10:10 a.m. and 10:29 a.m. (London time) for the
FTSE 100 Index, and between 10:10 a.m. and 10:31 a.m. (London time) for
the FTSE 250 Index on the third Friday of the expiration month.
Therefore, because trading in the expiring contract months will
normally cease on a Thursday at 4:15 p.m. (New York time), the EDSP for
exercise will be determined the day after trading has ceased, i.e.,
during the Friday morning LSE trading session, by 5:31 a.m. (New York
time). The last automated traded price prior to the EDSP auction or the
previous day's closing price will be used to calculate the final EDSP
if a security did not participate in the auction. During the auction
process, indications of the settlement price for each index are widely
disseminated every 15 seconds via special indexes called Expiry
Indexes. The purpose of the Expiry Indexes is to disseminate expected
settlement values as the auction progresses. When the auction is
finished, the final values of the Expiry Indexes are disseminated as
the EDSP values. The Expiry Indexes and subsequent EDSP values are
widely disseminated through major market data vendors including
Reuters, Bloomberg, and Thomson.
If the LSE is closed on the Friday before expiration, but the
Exchange remains open, then the last trading day for expiring FTSE
Index options will be moved earlier to Wednesday as if the Exchange had
had a Friday holiday. The settlement index value used for exercise will
be calculated during LSE's EDSP intra-day auction on Thursday morning.
Contract Specifications
The contract specifications for options on the FTSE Indexes are set
forth in Exhibits 3-1 and 3-2 to the proposed rule change. The FTSE
Indexes are broad-based indexes, as defined in NYSE Arca Rule 5.12.
Options on the FTSE Indexes are European-style and a.m. cash-settled.
The Exchange's standard trading hours for broad-based index options
(6:30 a.m. to 1:15 p.m., Pacific time), as set forth in Rule 7.1, will
apply to the FTSE Indexes. Exchange rules that are applicable to the
trading of options on broad-based indexes will apply to the reduced
values of the FTSE Indexes.\15\ Specifically, the trading of reduced
values of the FTSE Indexes will be subject to, among others, Exchange
rules governing margin requirements and trading halt procedures for
index options. Options shall be quoted and traded in U.S. dollars.
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\15\ See NYSE Arca Rule 5.12.
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For options on the Mini FTSE Indexes, the Exchange proposes to
amend Rule 5.15 to state that all broad-based index options contracts
shall be subject to a contract limitation fixed by the Exchange, which
shall not be larger than the limits provided in the chart included in
Rule 5.15. The proposed amended Rule 5.15 would establish aggregate
position limits for options on the Mini FTSE Indexes at 250,000
contracts on the same side of the market, provided no more than 150,000
of such contracts are in the nearest expiration month series.
Additionally, the Exchange proposes to amend NYSE Arca Rule 5.17
relating to the availability of an index option hedge exemption for
public customers. The proposed rule change would specify that, for
options on broad-based indexes other than for those that do not have
any position limits, the hedge exemption is 75,000 contracts in
addition to the standard limit.\16\ Furthermore, proprietary accounts
of members may receive an exemption of up to 500,000 contracts for the
purpose of facilitating public customer orders.\17\
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\16\ The same limits that apply to position limits shall apply
to exercise limits for these products.
\17\ See NYSE Arca Rule 6.8, Commentary .08.
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The Exchange proposes to apply broad-based index margin
requirements for the purchase and sale of options on the Mini FTSE
Indexes. Accordingly, purchases of put or call options with 9 months or
less until expiration must be paid for in full. Writers of uncovered
put or call options must deposit/maintain 100% of the option proceeds,
plus 15% of the aggregate contract value (current index level x $100),
less any out-of-the-money amount, subject to a minimum of the option
proceeds plus 10% of the aggregate contract value for call options and
a minimum of the option proceeds plus 10% of the aggregate exercise
price amount for put options.
The Exchange proposes to set strike price intervals at least 2\1/2\
points for certain near-the-money series in near-term expiration months
when the index level of the FTSE Indexes is below 200, and 5-point
strike price intervals for other options series with expirations up to
one year, and at least 10-point strike price intervals for longer-term
options. The minimum tick size for series trading below $3 shall be
$0.05, and for series trading at or above $3, the minimum tick size
shall be $0.10.
The Exchange proposes to list options on reduced values of the FTSE
Indexes in the three consecutive near-term expiration months plus up to
three successive expiration months in the March cycle. For example,
consecutive expirations of January, February, March, plus June,
September, and December expirations would be listed.\18\ In addition,
long-term option series having up to sixty months to expiration may be
traded.\19\ The trading of long-term FTSE Indexes shall be subject to
the same rules that govern the trading of all the Exchange's index
options, including sales practice rules, margin requirements, and
trading rules.
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\18\ See NYSE Arca Rule 5.19(a)(3).
\19\ See NYSE Arca Rule 5.19(b)(1). The Exchange is not listing
reduced value LEAPS on the FTSE Indexes pursuant to NYSE Arca Rule
5.19(b)(2).
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Options on the Mini FTSE Indexes shall be subject to the same rules
that presently govern the trading of Exchange index options, including
sales practice rules, margin requirements, trading rules, and position
and exercise limits.
The Exchange proposes to amend Rule 5.19(a)(7)(A) to specify Mini
FTSE
[[Page 36949]]
Index options as a.m.-settled options approved for trading on the
Exchange. The Exchange also proposes to add Commentary .01 to Rule 5.22
(Disclaimers) to specify that FTSE International Limited is the
reporting authority for the FTSE 100 and 250 Indexes.
Surveillance and Capacity
The Exchange represents that it has an adequate surveillance
program in place for options traded on the FTSE Indexes and intends to
apply those same program procedures that it applies to the Exchange's
other index options. Additionally, the Exchange has provided the
Commission, on a confidential basis, a representation made by FTSE to
the Exchange regarding FTSE's insider trading policies, as they pertain
to the broker-dealer members of FTSE's EMEA Committee who are charged
with the selection of component securities that comprise the FTSE
Indexes. The FTSE EMEA Committee members are also required to maintain
in confidence, including non-disclosure to another party, any
information that they may be given by virtue of their membership of the
FTSE EMEA Committee, unless such information is already in the public
domain or where disclosure is required by law. NYSE Arca is also a
member of the Intermarket Surveillance Group (ISG). The members of the
ISG include all of the U.S. registered stock and options markets. In
addition, the LSE and LIFFE are members of ISG. ISG members work
together to coordinate surveillance and investigative information
sharing in the stock and options markets. In addition, the major
futures exchanges are members of the ISG, which allows for the sharing
of surveillance information for potential intermarket trading abuses.
The Exchange has the necessary systems capacity to support new
options series that will result from the introduction of reduced values
of the FTSE Indexes, including LEAPS. The Exchange has provided the
Commission system capacity information that supports its system
capacity representations.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
and furthers the objectives of Section 6(b)(5) of the Act,\20\ in that
it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, 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. The Exchange believes that the proposed rule
change will provide for additional competition in the U.S. options
markets in trading FTSE Index options, to the benefit of the investing
public.
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\20\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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
No written comments were solicited or received with respect to the
proposed rule change.
III. 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 Number SR-NYSEArca-2008-61 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2008-61. 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 the filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2008-61 and should
be submitted on or before July 21, 2008.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
After careful consideration, 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.\21\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b) of the Act,\22\ in general,
and furthers the objectives of Section 6(b)(5),\23\ in particular, in
that it is designed to promote just and equitable principles of trade,
to remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general to protect
investors and the public interest.
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\21\ In approving this proposal, the Commission notes that it
has considered the proposal's impact on efficiency, competition, and
capital formation. See 15 U.S.C. 78c(f).
\22\ 15 U.S.C. 78f(b).
\23\ 15 U.S.C. 78f(b)(5).
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Because the FTSE 100 and FTSE 250 Indexes are broad-based indexes
of actively traded, well-capitalized stocks, the trading of the
proposed Index options on the Exchange does not raise unique regulatory
concerns. The options on the Mini FTSE Indexes will be traded under
NYSE Arca's existing regulatory regime for index options, which
includes among other things, positions and exercise limits and margin
requirements. Additionally, the Exchange has represented that it has
adequate system capacity and surveillance for these Index options and
that the index value will be disseminated at least every 15 seconds. In
addition, as ISG members, NYSE Arca, LSE, and LIFFE work together to
coordinate surveillance and investigate information sharing in the
stock and options markets.
[[Page 36950]]
Under Section 19(b)(2) of the Act,\24\ the Commission may not
approve any proposed rule change prior to the thirtieth day after
publication of the notice of the filing thereof, unless the Commission
find good cause for so doing and publishes its reasons for so finding.
The Commission believes that the proposed rule filing does not raise
any new, unique or substantive issues from those raised in similar
proposals previously approved the Commission,\25\ allowing other
exchanges to list and trade reduced value index options on the FTSE
Indexes. Accordingly, the Commission hereby finds good cause for
approving the proposed rule change thereto prior to thirtieth day after
the date of publication of notice of filings thereof in the Federal
Register.
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\24\ 15 U.S.C. 78s(b)(2).
\25\ See Securities Exchange Act Release No. 29722 (September
23, 1991), 56 FR 49807 (October 1, 1991) (order approving SR-CBOE-
91-07); 53484 (March 14, 2006), 71 FR 14268 (March 21, 2006) (order
approving SR-ISE-2005-25).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\26\ that the proposed rule change (SR-NYSEArca-2008-61) be, and it
hereby is, approved on an accelerated basis.
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\26\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-14767 Filed 6-27-08; 8:45 am]
BILLING CODE 8010-01-P
