Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of Proposed Rule Change Amending Position Limits for Certain Exchange Traded Funds, 8774-8776 [2010-3773]

Download as PDF 8774 Federal Register / Vol. 75, No. 37 / Thursday, February 25, 2010 / Notices 15A(b)(6) of the Exchange Act,10 which requires, among other things, that FINRA’s rules be designed to prevent fraud and manipulative practices and to promote just and equitable principles of trade and, in general, to protect investors and the public interest. The Commission believes that the proposed rule change is reasonably designed to achieve these ends by providing FINRA member broker-dealers the opportunity to evaluate the appropriateness of certain lending arrangements between their registered persons and others, to the extent permitted by a FINRA member broker-dealer, and the potential that these lending arrangements could create certain conflicts of interest. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Exchange Act,11 that the proposed rule change (SR– FINRA–2009–095) be, and hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Florence E. Harmon, Deputy Secretary. [FR Doc. 2010–3775 Filed 2–24–10; 8:45 am] BILLING CODE 8011–01–P 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 self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those 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 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–61535; File No. SR– NYSEAmex–2010–14] Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of Proposed Rule Change Amending Position Limits for Certain Exchange Traded Funds February 18, 2010. jlentini on DSKJ8SOYB1PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to (a) amend the Position Limits for certain highly liquid Exchange Traded Funds (‘‘ETFs’’); (b) memorialize a previously approved provision that was never inserted in the Exchange’s Rules, as well as clarify its applicable scope, and (c) amend certain rules to define certain contract terms. The text of the proposed rule change is available on NYSE Amex’s Web site at (https://www.nyse.com), on the Commission’s Web site at https:// www.sec.gov, at NYSE Amex, and at the Commission’s Public Reference Room. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on February 17, 2010, NYSE Amex LLC (‘‘NYSE Amex’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1. Purpose The purpose of this filing is to (a) eliminate Position Limits in certain highly active ETFs, (b) memorialize a previously approved provision that was never inserted in the Exchange’s Rules, as well as clarify its applicable scope, and (c) amend certain rules to define certain contract terms. The provision at issue—allowing for option contracts on ETFs that overly 1,000 shares (‘‘Jumbo options’’)—was approved in 1998, but did not include changes to Rule Text at that time.3 In order to resume listing these products, the Exchange is proposing to restrict the listing of Jumbo options to four specific ETFs that have no Position Limit (as proposed below), and also define how strike prices and premiums will be expressed for Jumbo contracts by amending Rule 903 and Rule 959NY.4 3 Exchange Act Release No. 40157, File No. SR– Amex–96–44 (July 1, 1998) 63 FR 37426 (July 10, 1998). 4 SR–Amex–96–44 was also silent on the manner of expressing strike prices and premium bids and offers, thus it is necessary to define them in this filing. 10 15 U.S.C. 78o–3(b)(6). U.S.C. 78s(b)(2). 12 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 11 15 VerDate Nov<24>2008 16:34 Feb 24, 2010 Jkt 220001 PO 00000 Frm 00130 Fmt 4703 Sfmt 4703 Position Limits Four ETFs have been approved under NYSE Amex Rule 904 to have exceptional Position Limits. These are NASDAQ 100 Tracking Stock (QQQQ); SPDR S&P 500 ETF (SPY); iShares Russell 2000 Index Fund (IWM); and DIAMONDS Trust (DIA). NYSE Amex proposes that these four ETFs have no Position Limit. Position and Exercise limits were introduced as a means of forestalling the potential manipulation of an equity’s price by someone that established a large option position. This concern was mitigated with cash settled index options since the contract settled for cash as opposed to physical shares of stock. Additionally, those index options whose position limits have been eliminated are based on a broad based index comprised of many equities further mitigating concerns about manipulation through the establishment and subsequent exercise of a large options position. This resulted in a repeal of position and exercise limits for the options on the aforementioned broad based indexes.5 While ETF options are physically settled, NYSE Amex feels that there are specific aspects related to an ETF’s structure that serve to mitigate any concerns about manipulation and allow eliminating position limits on a narrow subset of the ETF option universe. First, ETF’s are structured as open-ended trusts or mutual funds that can continually issue new shares as required to satisfy demand. This is in sharp contrast to an equity that has a float that is only increased by corporate action and is not a function of investor demand. Second, the ETF itself is comprised of a basket of stocks, specifically those that comprise a benchmark broad based index. Additionally, in approving the elimination of position and exercise limits for RUT, NDX, DJX, and SPX options, the Commission considered the capitalization of the components of each of these indexes and the deep and liquid markets for the securities underlying each index significantly reduced concerns of market manipulation or disruption in the underlying markets. Shares in these four underlying ETFs have exceptionally high trading volume, demonstrating extraordinary liquidity. The volume for each of these ETFs for 5 See Securities Exchange Act Release No. 56351 (September 4, 2007); see also Securities Exchange Act Release No. 52649 (October 21, 2005), 70 FR 62146 (October 28, 2005) (SR–Amex–2005–063) (‘‘NDX Approval Order’’); see also Securities Exchange Act Release No. 46393 (August 21, 2002), 67 FR 55289 (August 28, 2002) (SR–Amex–2002– 31) (‘‘XMI/XII Permanent Approval Order’’). E:\FR\FM\25FEN1.SGM 25FEN1 8775 Federal Register / Vol. 75, No. 37 / Thursday, February 25, 2010 / Notices the last six months of 2009 was at least a full order of magnitude greater than the standard for the highest current position limit tier (250,000 contracts on 100 million shares traded): SPY .......................................................................................................................................................... IWM .......................................................................................................................................................... DIA ........................................................................................................................................................... QQQQ ...................................................................................................................................................... Additionally, the options trading volume in these issues is comparable to index option trading in similar products 22,828,864,134 6,480,281,641 1,409,445,977 12,562,364,006 198,511,862 54,002,347 11,745,383 104,686,367 (including their counterpart indexes) which have no Position Limit: Nat’l rank Symbol Company name 1 .......................................... 3 .......................................... 4 .......................................... 6 .......................................... 20 ........................................ 24 ........................................ 49 ........................................ 57 ........................................ 147 ...................................... SPY .................................... SPX .................................... QQQQ ................................ IWM .................................... RUT .................................... DIA ..................................... OEX ................................... NDX ................................... DJX .................................... SPDR Trust Series 1 ...................................................... S&P 500 Index ............................................................... Powershares QQQ Trust ................................................ iShares Russell 2000 Index Fund .................................. Russell 2000 Index ......................................................... DIAMONDS Trust Series I ............................................. S&P 100 Index ............................................................... Nasdaq 100 Stock Index ................................................ Dow Jones Industrial Average Index ............................. Jumbo Options Contracts SR–Amex–96–44 (‘‘96–44’’) provided that the Exchange could list contracts overlying 1000 shares of an ETF, 100 shares of an ETF, or both. To eliminate confusion, NYSE Amex is proposing to add a Commentary to Rule 901—Option Contracts to Be Traded. At the time that 96–44 was approved, the number of ETFs was limited, and the Exchange contemplated listing options on only the most active ETFs. Since that time, the universe of ETFs has grown substantially, with some becoming very actively traded, and others with relatively low volume. The Exchange proposes to designate four very active ETFs as eligible for 1,000 share contracts, and also restrict Jumbo contracts to only those ETFs that have been approved to have no Position Limit. Pursuant to this filing, the Exchange proposes to designate the following four ETFs as eligible to trade Jul–Dec 2009 avg. daily share vol. Jul–Dec 2009 total share vol. ETF as Jumbo options: NASDAQ 100 Tracking Stock (QQQQ); SPDR S&P 500 ETF (SPY); iShares Russell 2000 Index Fund (IWM); and DIAMONDS Trust (DIA). Contract Terms To avoid investor confusion with contracts in the same ETF that overly 100 shares, NYSE Amex is further proposing to amend Rules 903 and 959NY to define how strike prices will be set and premiums defined for contracts overlying 1,000 shares. Because a standard option contract is identified in terms of 100 shares and related values on a per-share basis, the option strike prices result in being equal to 1⁄100th of the deliverable value, and premiums are equal to 1⁄100th of the total cost of the contract. NYSE Amex proposes to maintain this ratio for Jumbo contracts in such a way ADV 1,383,317 651,303 613,406 323,983 97,046 80,622 46,766 40,470 15,696 Current position limit 300,000 Unlimited. 900,000 500,000 Unlimited. 300,000 Unlimited. Unlimited. Unlimited. as to avoid confusion between standard contracts and Jumbo contracts. Commentary .10 to Rule 903 proposes that strike prices be set at 1/100th of the total contract deliverable value. Thus, a Jumbo contract to deliver an ETF at $45 per share would carry a total deliverable value of $45,000, and the strike price would be set at 450. Similarly, proposed sub-paragraph (c) to Rule 959NY would maintain that bids and offers in Jumbo contracts would be set at 1/100th of the total value of the contract. Thus if an ETF with a Jumbo contract strike price of 450 was trading at $46 per share, the intrinsic $1 per share value of the Jumbo contract would be expressed as ‘‘10’’, and denote a total contract value of $1,000. The table below demonstrates the difference between a Jumbo contract and a standard contract for options to call or put shares at $45 per share, with a bid or offer of $3.20 per share: JUMBO CONTRACTS VS. STANDARD CONTRACTS Standard jlentini on DSKJ8SOYB1PROD with NOTICES Share Deliverable Upon Exercise .................................................................................. 100 shares ................................................ Strike Price of $45/per share ......................................................................................... Bid or Offer of $3.20 per share ...................................................................................... Total Value of Deliverable .............................................................................................. Total Value of Contract .................................................................................................. 45 .............................................................. 3.20 ........................................................... $4,500 ....................................................... $320 .......................................................... VerDate Nov<24>2008 16:34 Feb 24, 2010 Jkt 220001 PO 00000 Frm 00131 Fmt 4703 Sfmt 4703 E:\FR\FM\25FEN1.SGM 25FEN1 Jumbo 1,000 shares. 450. 32.00. $45,000. $3,200. 8776 Federal Register / Vol. 75, No. 37 / Thursday, February 25, 2010 / Notices 2. Statutory Basis Electronic Comments The Exchange believes the proposed rule change is consistent with Section 6(b) 6 of the Securities Exchange Act of 1934 (the ‘‘Act’’), in general, and furthers the objectives of Section 6(b)(5) 7 in particular in that it is designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, to remove impediments to and to perfect the mechanism for a free and open market and a national market system and, in general, to protect investors and the public interest, by providing additional methods to trade highly liquid options, and provide greater ability to mitigate risk in managing large portfolios by removing unnecessary position limits. • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File No. SR–NYSEAmex–2010–14 on the subject line. 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. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve the proposed rule change, or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. jlentini on DSKJ8SOYB1PROD with NOTICES 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: 6 15 7 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). VerDate Nov<24>2008 16:34 Feb 24, 2010 Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549–1090. [Release No. 34–61533; File No. SR–CBOE– 2010–011] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated: Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Reduction of the Customer Transaction Fee for OEX and XEO Weeklys Options February 18, 2010. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934, 15 U.S.C. 78s(b)(1), notice is hereby given that on January 29, 2010, Chicago Board All submissions should refer to File Options Exchange, Incorported (‘‘CBOE’’ Number SR–NYSEAmex–2010–14. This or the ‘‘Exchange’’) filed with the file number should be included on the Securities and Exchange Commission subject line if e-mail is used. To help the (‘‘Commission’’) the proposed rule Commission process and review your change as described in Items I, II and III comments more efficiently, please use below, which Items have been prepared only one method. The Commission will by CBOE. The Commission is post all comments on the Commission’s publishing this notice to solicit Internet Web site (https://www.sec.gov/ comments on the proposed rule change rules/sro.shtml). Copies of the from interested persons. submission, all subsequent I. Self-Regulatory Organization’s amendments, all written statements Statement of the Terms of Substance of with respect to the proposed rule the Proposed Rule Change change that are filed with the Chicago Board Options Exchange, Commission, and all written Incorporated (‘‘CBOE’’ or ‘‘Exchange’’) communications relating to the proposes to amend its Fees Schedule to proposed rule change between the reduce the transaction fee for short term Commission and any person, other than options series (‘‘Weeklys’’) in options on those that may be withheld from the the S&P 100 Index American-style public in accordance with the options (OEX) and S&P 100 Index provisions of 5 U.S.C. 552, will be European-style options (XEO). The text available for Web site viewing and of the proposed rule change is available printing in the Commission’s Public on the Exchange’s Web site (https:// Reference Room, on official business www.cboe.org/legal), at the Exchange’s days between the hours of 10 a.m. and Office of the Secretary and at the 3 p.m. Copies of such filing also will be Commission. available for inspection and copying at II. Self-Regulatory Organization’s the principal office of the Exchange. All Statement of the Purpose of, and comments received will be posted Statutory Basis for, the Proposed Rule without change; the Commission does Change not edit personal identifying In its filing with the Commission, information from submissions. You CBOE included statements concerning should submit only information that the purpose of and basis for the you wish to make available publicly. All proposed rule change and discussed any submissions should refer to File comments it received on the proposed Number SR–NYSEAmex–2010–14 and rule change. The text of these statements should be submitted on or before March may be examined at the places specified 12, 2010. in Item IV below. CBOE has prepared summaries, set forth in sections A, B, For the Commission, by the Division of and C below, of the most significant Trading and Markets, pursuant to delegated aspects of such statements. authority.8 Florence E. Harmon, Deputy Secretary. [FR Doc. 2010–3773 Filed 2–24–10; 8:45 am] BILLING CODE 8011–01–P 8 17 Jkt 220001 SECURITIES AND EXCHANGE COMMISSION PO 00000 (a) Purpose Weeklys are listed index and equity options that match all other terms of CFR 200.30–3(a)(12). Frm 00132 Fmt 4703 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change Sfmt 4703 E:\FR\FM\25FEN1.SGM 25FEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 75, Number 37 (Thursday, February 25, 2010)]
[Notices]
[Pages 8774-8776]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-3773]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61535; File No. SR-NYSEAmex-2010-14]

Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of
Proposed Rule Change Amending Position Limits for Certain Exchange
Traded Funds

February 18, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on February 17, 2010, NYSE Amex LLC (``NYSE Amex''
or ``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------

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

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

The Exchange proposes to (a) amend the Position Limits for certain
highly liquid Exchange Traded Funds (``ETFs''); (b) memorialize a
previously approved provision that was never inserted in the Exchange's
Rules, as well as clarify its applicable scope, and (c) amend certain
rules to define certain contract terms. The text of the proposed rule
change is available on NYSE Amex's Web site at (https://www.nyse.com),
on the Commission's Web site at https://www.sec.gov, at NYSE Amex, 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 self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those 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
The purpose of this filing is to (a) eliminate Position Limits in
certain highly active ETFs, (b) memorialize a previously approved
provision that was never inserted in the Exchange's Rules, as well as
clarify its applicable scope, and (c) amend certain rules to define
certain contract terms. The provision at issue--allowing for option
contracts on ETFs that overly 1,000 shares (``Jumbo options'')--was
approved in 1998, but did not include changes to Rule Text at that
time.\3\ In order to resume listing these products, the Exchange is
proposing to restrict the listing of Jumbo options to four specific
ETFs that have no Position Limit (as proposed below), and also define
how strike prices and premiums will be expressed for Jumbo contracts by
amending Rule 903 and Rule 959NY.\4\
---------------------------------------------------------------------------

\3\ Exchange Act Release No. 40157, File No. SR-Amex-96-44 (July
1, 1998) 63 FR 37426 (July 10, 1998).
\4\ SR-Amex-96-44 was also silent on the manner of expressing
strike prices and premium bids and offers, thus it is necessary to
define them in this filing.
---------------------------------------------------------------------------

Position Limits
Four ETFs have been approved under NYSE Amex Rule 904 to have
exceptional Position Limits. These are NASDAQ 100 Tracking Stock
(QQQQ); SPDR S&P 500 ETF (SPY); iShares Russell 2000 Index Fund (IWM);
and DIAMONDS Trust (DIA). NYSE Amex proposes that these four ETFs have
no Position Limit.
Position and Exercise limits were introduced as a means of
forestalling the potential manipulation of an equity's price by someone
that established a large option position. This concern was mitigated
with cash settled index options since the contract settled for cash as
opposed to physical shares of stock. Additionally, those index options
whose position limits have been eliminated are based on a broad based
index comprised of many equities further mitigating concerns about
manipulation through the establishment and subsequent exercise of a
large options position. This resulted in a repeal of position and
exercise limits for the options on the aforementioned broad based
indexes.\5\
---------------------------------------------------------------------------

\5\ See Securities Exchange Act Release No. 56351 (September 4,
2007); see also Securities Exchange Act Release No. 52649 (October
21, 2005), 70 FR 62146 (October 28, 2005) (SR-Amex-2005-063) (``NDX
Approval Order''); see also Securities Exchange Act Release No.
46393 (August 21, 2002), 67 FR 55289 (August 28, 2002) (SR-Amex-
2002-31) (``XMI/XII Permanent Approval Order'').
---------------------------------------------------------------------------

While ETF options are physically settled, NYSE Amex feels that
there are specific aspects related to an ETF's structure that serve to
mitigate any concerns about manipulation and allow eliminating position
limits on a narrow subset of the ETF option universe. First, ETF's are
structured as open-ended trusts or mutual funds that can continually
issue new shares as required to satisfy demand. This is in sharp
contrast to an equity that has a float that is only increased by
corporate action and is not a function of investor demand. Second, the
ETF itself is comprised of a basket of stocks, specifically those that
comprise a benchmark broad based index.
Additionally, in approving the elimination of position and exercise
limits for RUT, NDX, DJX, and SPX options, the Commission considered
the capitalization of the components of each of these indexes and the
deep and liquid markets for the securities underlying each index
significantly reduced concerns of market manipulation or disruption in
the underlying markets.
Shares in these four underlying ETFs have exceptionally high
trading volume, demonstrating extraordinary liquidity. The volume for
each of these ETFs for

[[Page 8775]]

the last six months of 2009 was at least a full order of magnitude
greater than the standard for the highest current position limit tier
(250,000 contracts on 100 million shares traded):

------------------------------------------------------------------------
Jul-Dec 2009 total Jul-Dec 2009 avg.
ETF share vol. daily share vol.
------------------------------------------------------------------------
SPY............................. 22,828,864,134 198,511,862
IWM............................. 6,480,281,641 54,002,347
DIA............................. 1,409,445,977 11,745,383
QQQQ............................ 12,562,364,006 104,686,367
------------------------------------------------------------------------

Additionally, the options trading volume in these issues is
comparable to index option trading in similar products (including their
counterpart indexes) which have no Position Limit:

----------------------------------------------------------------------------------------------------------------
Current position
Nat'l rank Symbol Company name ADV limit
----------------------------------------------------------------------------------------------------------------
1............................... SPY................ SPDR Trust Series 1..... 1,383,317 300,000
3............................... SPX................ S&P 500 Index........... 651,303 Unlimited.
4............................... QQQQ............... Powershares QQQ Trust... 613,406 900,000
6............................... IWM................ iShares Russell 2000 323,983 500,000
Index Fund.
20.............................. RUT................ Russell 2000 Index...... 97,046 Unlimited.
24.............................. DIA................ DIAMONDS Trust Series I. 80,622 300,000
49.............................. OEX................ S&P 100 Index........... 46,766 Unlimited.
57.............................. NDX................ Nasdaq 100 Stock Index.. 40,470 Unlimited.
147............................. DJX................ Dow Jones Industrial 15,696 Unlimited.
Average Index.
----------------------------------------------------------------------------------------------------------------

Jumbo Options Contracts
SR-Amex-96-44 (``96-44'') provided that the Exchange could list
contracts overlying 1000 shares of an ETF, 100 shares of an ETF, or
both. To eliminate confusion, NYSE Amex is proposing to add a
Commentary to Rule 901--Option Contracts to Be Traded.
At the time that 96-44 was approved, the number of ETFs was
limited, and the Exchange contemplated listing options on only the most
active ETFs. Since that time, the universe of ETFs has grown
substantially, with some becoming very actively traded, and others with
relatively low volume. The Exchange proposes to designate four very
active ETFs as eligible for 1,000 share contracts, and also restrict
Jumbo contracts to only those ETFs that have been approved to have no
Position Limit. Pursuant to this filing, the Exchange proposes to
designate the following four ETFs as eligible to trade as Jumbo
options: NASDAQ 100 Tracking Stock (QQQQ); SPDR S&P 500 ETF (SPY);
iShares Russell 2000 Index Fund (IWM); and DIAMONDS Trust (DIA).
Contract Terms
To avoid investor confusion with contracts in the same ETF that
overly 100 shares, NYSE Amex is further proposing to amend Rules 903
and 959NY to define how strike prices will be set and premiums defined
for contracts overlying 1,000 shares. Because a standard option
contract is identified in terms of 100 shares and related values on a
per-share basis, the option strike prices result in being equal to \1/
100\th of the deliverable value, and premiums are equal to \1/100\th of
the total cost of the contract.
NYSE Amex proposes to maintain this ratio for Jumbo contracts in
such a way as to avoid confusion between standard contracts and Jumbo
contracts.
Commentary .10 to Rule 903 proposes that strike prices be set at 1/
100th of the total contract deliverable value. Thus, a Jumbo contract
to deliver an ETF at $45 per share would carry a total deliverable
value of $45,000, and the strike price would be set at 450.
Similarly, proposed sub-paragraph (c) to Rule 959NY would maintain
that bids and offers in Jumbo contracts would be set at 1/100th of the
total value of the contract. Thus if an ETF with a Jumbo contract
strike price of 450 was trading at $46 per share, the intrinsic $1 per
share value of the Jumbo contract would be expressed as ``10'', and
denote a total contract value of $1,000.
The table below demonstrates the difference between a Jumbo
contract and a standard contract for options to call or put shares at
$45 per share, with a bid or offer of $3.20 per share:

Jumbo Contracts vs. Standard Contracts
------------------------------------------------------------------------
Standard Jumbo
------------------------------------------------------------------------
Share Deliverable Upon Exercise 100 shares........ 1,000 shares.
Strike Price of $45/per share.. 45................ 450.
Bid or Offer of $3.20 per share 3.20.............. 32.00.
Total Value of Deliverable..... $4,500............ $45,000.
Total Value of Contract........ $320.............. $3,200.
------------------------------------------------------------------------

[[Page 8776]]

2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) \6\ of the Securities Exchange Act of 1934 (the ``Act''),
in general, and furthers the objectives of Section 6(b)(5) \7\ in
particular in that it is designed to promote just and equitable
principles of trade, to prevent fraudulent and manipulative acts, to
remove impediments to and to perfect the mechanism for a free and open
market and a national market system and, in general, to protect
investors and the public interest, by providing additional methods to
trade highly liquid options, and provide greater ability to mitigate
risk in managing large portfolios by removing unnecessary position
limits.
---------------------------------------------------------------------------

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

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

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

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

No written comments were solicited or received with respect to the
proposed rule change.

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

Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:

(A) By order approve the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File No. SR-NYSEAmex-2010-14 on the subject line.

Paper Comments

Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEAmex-2010-14. 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 Web site
viewing and printing in the Commission's Public Reference Room, on
official business days between the hours of 10 a.m. and 3 p.m. Copies
of such filing also will be available for inspection and copying at the
principal office of 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-NYSEAmex-2010-14 and should be submitted on or before
March 12, 2010.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-3773 Filed 2-24-10; 8:45 am]
BILLING CODE 8011-01-P

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