Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Approving a Proposed Rule Change To Amend the $1 Strike Program To Allow Low-Strike LEAPS, 59296-59297 [E9-27504]
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Federal Register / Vol. 74, No. 220 / Tuesday, November 17, 2009 / Notices
the Exchange pursuant to Rule 19b–4 of
the Act.10
(c) NYFIX will not share employees or
databases with the Exchange, any
facility of the Exchange, or any other
affiliate of the Exchange or their
facilities, and will be housed in a
separate office.
(d) NYFIX will only be notified of any
changes or improvements to any of the
Exchange’s operations or trading
facilities in the same manner that other
persons are notified of such changes or
improvements;
(e) NYFIX will not disclose any
system or design specifications, or any
other information, to any employees of
the Exchange, any facility of the
Exchange, or any other affiliate of the
Exchange or their facilities that would
give NYFIX an unfair advantage over its
competitors.
(f) None of the Exchange, any facility
of the Exchange, or any other affiliate of
the Exchange or their facilities will
disclose any system or design
specifications, or any other information,
to any employees of NYFIX or any
affiliate of NYFIX that would give the
Exchange, any other facility of the
Exchange, any other affiliate of the
Exchange, or NYFIX an unfair advantage
over its competitors.
The Commission also notes that each
of NYFIX Millenium and NYFIX
Securities has the Financial Industry
Regulatory Authority (‘‘FINRA’’), an
unaffiliated self-regulatory organization
(‘‘SRO’’), as its designated examining
authority and neither broker-dealer is a
member of the Exchange.11
The Commission finds that the
temporary proposed affiliation between
the Exchange and NYFIX Millennium
and NYFIX Securities, pursuant to the
proposed terms and conditions, is
consistent with the Act, particularly
Section 6(b)(5) thereunder.12 The
Commission continues to be concerned
about potential unfair competition and
conflicts of interest when an exchange,
or one of its affiliates, is the parent
company of a broker-dealer that
provides Routing Services that may be
in competition with services provided
by members of that exchange. The
Commission believes, however, that the
temporary nature of the affiliation,
together with the proposed terms and
conditions, are reasonably designed to
mitigate concern about potential unfair
competition and conflicts of interest
between the commercial interests of the
10 15
U.S.C. 78a.
Notice.
12 15 U.S.C. 78(f)(b)(5).
11 See
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Exchange or its affiliates, and the
Exchange’s regulatory responsibilities.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,13 that the
proposed rule change (SR–NYSE–2009–
96), as amended, is hereby approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–27501 Filed 11–16–09; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–60978; File No. SR–CBOE–
2009–068]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Order Approving a
Proposed Rule Change To Amend the
$1 Strike Program To Allow Low-Strike
LEAPS
November 10, 2009.
On September 16, 2009, the Chicago
Board Options Exchange, Incorporated
(the ‘‘Exchange’’ or ‘‘CBOE’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend CBOE’s $1 Strike
Program. The proposed rule change was
published for comment in the Federal
Register on October 7, 2009.3 The
Commission received no comments on
the proposed rule change. This order
approves the proposed rule change.
LEAPS are long-term equity options
that expire from 12 to 39 months from
the time they are listed.4 The proposed
rule change expands the Exchange’s $1
Strike Program (‘‘Program’’) to permit
the exchange to list LEAPS with low
strike prices 5 and at $1 strike price
13 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 60749
(September 30, 2009), 74 FR 51632.
4 See CBOE Rule 5.8.
5 CBOE, along with the other options exchanges,
recently amended the Options Listing Procedures
Plan (‘‘OLPP’’) to adopt objective, exercise price
range limitations applicable to options on
individual equity securities, ETFs, and trust-issued
receipts. See Securities Exchange Act Release No.
60531 (August 19, 2009), 74 FR 43173 (August 26,
2009) (approving Amendment No. 3 to the OLPP).
The exercise price range limitations of paragraph
(3)(g) of the OLPP state that the exercise price of
each newly listed option on an equity security, ETF,
14 17
PO 00000
Frm 00184
Fmt 4703
Sfmt 4703
intervals. Specifically, the Exchange
will be able to list LEAPS series having
strike prices of $1, $2, $3, $4, and $5 in
up to 200 option classes on individual
securities that are in the Exchange’s
Program or another exchange’s
Program.6 CBOE believes that deep outof-the-money put options that could be
listed under this proposal are
functionally similar to credit default
swaps and could be a viable, liquid
alternative to OTC-traded credit default
swaps.
The margin requirements set forth in
Chapter XII of the Exchange’s rules and
the position and exercise requirements
set forth in CBOE Rules 4.11 and 4.12
will apply to these new series, and no
changes to those requirements were
proposed.
The Commission has carefully
reviewed the proposed rule change and
finds that it is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.7 In
particular, the Commission finds that
the proposed rule change is consistent
with Section 6(b)(5) of the Act,8 which
requires, among other things, that the
rules of an exchange be designed to
promote just and equitable principles of
trade, 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
Commission believes that the low-strike
LEAPS contemplated in this proposal
will provide investors with a potentially
useful investment choice. The proposal
will extend to these options the benefits
of a listed exchange market, which
or trust-issued receipt shall be fixed at a price per
unit that is reasonably close to the price of the
underlying security at or about the time of the series
listing. Under paragraph (3)(g)(i), if the price of the
underlying security is less than or equal to $20, the
exchange shall not list new option series with an
exercise price more than 100% above or below the
price of the underlying security; and if the price of
the underlying security is greater than $20, the
exchange shall not list new option series with an
exercise price more than 50% above or below the
price of the underlying security. However,
paragraph (3)(g)(ii) of the OLPP states that these
exercise price range limitations do not apply with
regard to, among others, option classes participating
in the Program. Therefore, LEAPS series listed
under this proposal would not be subject to the
exercise price range limitations contained in
paragraph (3)(g).
6 However, if the Exchange already has listed a
LEAPS series with a $2.50 strike price, it would be
permitted under this proposal to list additional
series with strike prices of $1, $4, and $5, but not
series with strike prices of $2 or $3. See CBOE Rule
5.5, Interpretation .01(a)(3).
7 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
8 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 74, No. 220 / Tuesday, November 17, 2009 / Notices
include a centralized forum for price
discovery, pre- and post-trade
transparency, standardized contract
specifications, and the guarantee of the
Options Clearing Corporation.
The Commission believes that the
proposal strikes a reasonable balance
between the Exchange’s desire to offer a
wider array of products with the need
to avoid unnecessary proliferation of
options series and the corresponding
increase in quotes. In approving the
proposed rule change, the Commission
has relied on the Exchange’s
representation that it has the necessary
systems capacity to support the new
options series that will be listed under
this proposal. This approval order is
conditioned on CBOE’s adherence to
this representation. The Commission
expects the Exchange to continue to
monitor for options with little or no
open interest and trading activity and to
act promptly to delist such options. In
addition, the Commission expects that
CBOE will monitor the trading volume
associated with the additional options
series listed as a result of this proposal
and the effect of these additional series
on market fragmentation and on the
capacity of the Exchange’s, the Options
Price Reporting Authority’s, and
vendors’ automated systems.
Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,9 that the
proposed rule change (SR–CBOE–2009–
068), be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–27504 Filed 11–16–09; 8:45 am]
mstockstill on DSKH9S0YB1PROD with NOTICES
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–60979; File No. SR–NSX–
2009–06]
Self-Regulatory Organizations;
National Stock Exchange, Inc.; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change to Amend
the Fee and Rebate Schedule to
Exclude, for Purposes of Calculating
the Automatic Execution Mode of
Order Interaction (‘‘AutoEx’’) Liquidity
Adding Displayed Order Rebate, An
ETP Holder’s Lowest Full Trading
Day’s Liquidity Adding Volume From
The Determination of The ETP Holder’s
‘‘Liquidity Adding Average Daily
Volume’’
November 10, 2009.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
29, 2009, National Stock Exchange, Inc.
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change, as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comment on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
National Stock Exchange, Inc.
(‘‘NSX®’’ or ‘‘Exchange’’) is proposing to
amend the Fee and Rebate Schedule (the
‘‘Fee Schedule’’) issued pursuant to
Exchange Rule 16.1(c) in order to
exclude, for purposes of calculating the
Automatic Execution Mode of order
interaction (‘‘AutoEx’’) liquidity adding
displayed order rebate with respect to
each ETP Holder during each
measurement period, such ETP Holder’s
lowest full trading day’s liquidity
adding volume from the determination
of the ETP Holder’s ‘‘liquidity adding
average daily volume.’’
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.nsx.com, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
9 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15
10 17
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20:50 Nov 16, 2009
2 17
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PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00185
Fmt 4703
59297
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 parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
With this rule change, the Exchange is
proposing to make a change to the Fee
and Rebate Schedule (the ‘‘Fee
Schedule’’) solely with respect to
calculation of the rebate for Displayed
Orders that add liquidity in AutoEx 3.
An ETP Holder’s liquidity adding
average daily volume (‘‘Liquidity
Adding ADV’’) is used, among other
things, to determine the amount of an
ETP Holder’s liquidity adding Displayed
Order rebate in AutoEx (‘‘AutoEx
Displayed Order Liquidity Adding
Rebate’’). Explanatory Endnote 3 of the
Fee Schedule currently defines
‘‘Liquidity Adding ADV’’ as, ‘‘with
respect to an ETP Holder 11, the number
of shares such ETP Holder has executed
as a liquidity provider on average per
trading day (excluding partial trading
days) across all tapes on NSX for the
calendar month (or partial month, as
applicable) in which the executions
occurred.’’ The instant rule filing
proposes to modify this definition to
exclude from such calculation, solely
for purposes of calculating the AutoEx
Displayed Order Liquidity Adding
Rebate, an ETP Holder’s lowest full
trading day’s liquidity adding volume
during each measurement period. Thus,
solely for purposes of calculating the
AutoEx Displayed Order Liquidity
Adding Rebate, the ratio used to
determine an ETP Holder’s Liquidity
Adding ADV during each measurement
period would be adjusted by (x)
excluding from the numerator the ETP
Holder’s lowest full trading day’s
volume of shares executed as a liquidity
provider, and (y) reducing the
denominator by one day.
The proposed rule change would not
modify other calculations of average
daily volume, volume tiers, or
associated fees that are included in the
Fee Schedule.
3 The Exchange’s two modes of order interaction
are described in NSX Rule 11.13(b).
Sfmt 4703
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]]>Agencies
[Federal Register Volume 74, Number 220 (Tuesday, November 17, 2009)]
[Notices]
[Pages 59296-59297]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-27504]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-60978; File No. SR-CBOE-2009-068]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Approving a Proposed Rule Change To Amend the $1
Strike Program To Allow Low-Strike LEAPS
November 10, 2009.
On September 16, 2009, the Chicago Board Options Exchange,
Incorporated (the ``Exchange'' or ``CBOE'') filed with the Securities
and Exchange Commission (``Commission''), pursuant to Section 19(b)(1)
of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend CBOE's $1 Strike
Program. The proposed rule change was published for comment in the
Federal Register on October 7, 2009.\3\ The Commission received no
comments on the proposed rule change. This order approves the proposed
rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 60749 (September 30,
2009), 74 FR 51632.
---------------------------------------------------------------------------
LEAPS are long-term equity options that expire from 12 to 39 months
from the time they are listed.\4\ The proposed rule change expands the
Exchange's $1 Strike Program (``Program'') to permit the exchange to
list LEAPS with low strike prices \5\ and at $1 strike price intervals.
Specifically, the Exchange will be able to list LEAPS series having
strike prices of $1, $2, $3, $4, and $5 in up to 200 option classes on
individual securities that are in the Exchange's Program or another
exchange's Program.\6\ CBOE believes that deep out-of-the-money put
options that could be listed under this proposal are functionally
similar to credit default swaps and could be a viable, liquid
alternative to OTC-traded credit default swaps.
---------------------------------------------------------------------------
\4\ See CBOE Rule 5.8.
\5\ CBOE, along with the other options exchanges, recently
amended the Options Listing Procedures Plan (``OLPP'') to adopt
objective, exercise price range limitations applicable to options on
individual equity securities, ETFs, and trust-issued receipts. See
Securities Exchange Act Release No. 60531 (August 19, 2009), 74 FR
43173 (August 26, 2009) (approving Amendment No. 3 to the OLPP). The
exercise price range limitations of paragraph (3)(g) of the OLPP
state that the exercise price of each newly listed option on an
equity security, ETF, or trust-issued receipt shall be fixed at a
price per unit that is reasonably close to the price of the
underlying security at or about the time of the series listing.
Under paragraph (3)(g)(i), if the price of the underlying security
is less than or equal to $20, the exchange shall not list new option
series with an exercise price more than 100% above or below the
price of the underlying security; and if the price of the underlying
security is greater than $20, the exchange shall not list new option
series with an exercise price more than 50% above or below the price
of the underlying security. However, paragraph (3)(g)(ii) of the
OLPP states that these exercise price range limitations do not apply
with regard to, among others, option classes participating in the
Program. Therefore, LEAPS series listed under this proposal would
not be subject to the exercise price range limitations contained in
paragraph (3)(g).
\6\ However, if the Exchange already has listed a LEAPS series
with a $2.50 strike price, it would be permitted under this proposal
to list additional series with strike prices of $1, $4, and $5, but
not series with strike prices of $2 or $3. See CBOE Rule 5.5,
Interpretation .01(a)(3).
---------------------------------------------------------------------------
The margin requirements set forth in Chapter XII of the Exchange's
rules and the position and exercise requirements set forth in CBOE
Rules 4.11 and 4.12 will apply to these new series, and no changes to
those requirements were proposed.
The Commission has carefully reviewed the proposed rule change and
finds that it is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\7\ In particular, the Commission finds that the proposed rule
change is consistent with Section 6(b)(5) of the Act,\8\ which
requires, among other things, that the rules of an exchange be designed
to promote just and equitable principles of trade, 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 Commission believes that the low-strike LEAPS
contemplated in this proposal will provide investors with a potentially
useful investment choice. The proposal will extend to these options the
benefits of a listed exchange market, which
[[Page 59297]]
include a centralized forum for price discovery, pre- and post-trade
transparency, standardized contract specifications, and the guarantee
of the Options Clearing Corporation.
---------------------------------------------------------------------------
\7\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission believes that the proposal strikes a reasonable
balance between the Exchange's desire to offer a wider array of
products with the need to avoid unnecessary proliferation of options
series and the corresponding increase in quotes. In approving the
proposed rule change, the Commission has relied on the Exchange's
representation that it has the necessary systems capacity to support
the new options series that will be listed under this proposal. This
approval order is conditioned on CBOE's adherence to this
representation. The Commission expects the Exchange to continue to
monitor for options with little or no open interest and trading
activity and to act promptly to delist such options. In addition, the
Commission expects that CBOE will monitor the trading volume associated
with the additional options series listed as a result of this proposal
and the effect of these additional series on market fragmentation and
on the capacity of the Exchange's, the Options Price Reporting
Authority's, and vendors' automated systems.
Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed rule change (SR-CBOE-2009-068), be, and
hereby is, approved.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78s(b)(2).
\10\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-27504 Filed 11-16-09; 8:45 am]
BILLING CODE 8011-01-P
