Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by NYSE Arca US LLC To Establish a $5 Strike Price Program, 3680-3682 [2011-1075]
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Federal Register / Vol. 76, No. 13 / Thursday, January 20, 2011 / Notices
caption to read: Miller Building,
Conference Rooms West 1 & 2, 11
Bladen Street, Annapolis, MD.
Dated: January 12, 2011.
Ivan J. Flores,
Paralegal Specialist, Recovery Accountability
and Transparency Board.
[FR Doc. 2011–1109 Filed 1–19–11; 8:45 am]
BILLING CODE 6821–15–P
SECURITIES AND EXCHANGE
COMMISSION
Proposed Collection; Comment
Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of Investor
Education and Advocacy,
Washington, DC 20549–0213.
mstockstill on DSKH9S0YB1PROD with NOTICES
Extension:
Rule 17a–3; SEC File No. 270–026; OMB
Control No. 3235–0033.
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.) the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the existing collection of information
provided for in Rule 17a–3 (17 CFR
240.17a–3), under the Securities
Exchange Act of 1934 (15 U.S.C. 78a et
seq.). The Commission plans to submit
this existing collection of information to
the Office of Management and Budget
for extension and approval.
Rule 17a–3 under the Securities
Exchange Act of 1934 establishes
minimum standards with respect to
business records that broker-dealers
registered with the Commission must
make and keep current. These records
are maintained by the broker-dealer (in
accordance with a separate rule), so they
can be used by the broker-dealer and
reviewed by Commission examiners, as
well as other regulatory authority
examiners, during inspections of the
broker-dealer.
The collections of information
included in Rule 17a–3 is necessary to
provide Commission, self-regulatory
organization (‘‘SRO’’) and state
examiners to conduct effective and
efficient examinations to determine
whether broker-dealers are complying
with relevant laws, rules, and
regulations. If broker-dealers were not
required to create these baseline,
standardized records, Commission, SRO
and state examiners could be unable to
determine whether broker-dealers are in
compliance with the Commission’s
antifraud and anti-manipulation rules,
financial responsibility program, and
other Commission, SRO, and State laws,
rules, and regulations.
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As of October 1, 2010 there were
5,057 broker-dealers registered with the
Commission. The Commission estimates
that these broker-dealer respondents
incur a total burden of 2,723,970 hours
per year to comply with Rule 17a–3.
Approximately 1,464,777 of those hours
are attributable to paragraph 17a–
3(a)(17), and about 1,259,193 hours are
attributable to the rest of Rule 17a–3.
Paragraph 17a–3(a)(17) contains
requirements to provide customers with
account information (approximately
683,969 hours) and requirements to
update customer account information
(approximately 777,436 hours).
In addition, Rule 17a–3 contains
ongoing operation and maintenance
costs for broker-dealers including the
cost of postage to provide customers
with account information, and costs for
equipment and systems development.
The Commission estimates that under
Rule 17a–3(a)(17), approximately
35,627,958 customers will need to be
provided with information regarding
their account on a yearly basis. The
Commission estimates that the postage
costs associated with providing those
customers with copies of their account
record information would be
approximately $10,688,387 per year
(35,627,958 × $0.30).1 The staff
estimates that the ongoing equipment
and systems development costs relating
to Rule 17a–3 for the industry would be
about $23,514,452 per year.
Consequently, the total cost burden
associated with Rule 17a–3 would be
approximately $34,202,839 per year.
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
agency, including whether the
information shall have practical utility;
(b) the accuracy of the agency’s estimate
of the burden of the proposed collection
of information; (c) ways to enhance the
quality, utility, and clarity of the
information to be collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
Please direct your written comments
to: Thomas Bayer, Chief Information
Officer, Securities and Exchange
Commission, c/o Remi Pavlik-Simon,
1 Estimates of postage costs are derived from past
conversations with industry representatives and
have been adjusted to account for inflation and
increases in postage costs.
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6432 General Green Way, Alexandria,
Virginia 22312 or send an e-mail to:
PRA_Mailbox@sec.gov.
Dated: January 12, 2011.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–1073 Filed 1–19–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–63707; File No. SR–
NYSEArca–2011–02]
Self-Regulatory Organizations; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change by NYSE
Arca US LLC To Establish a $5 Strike
Price Program
January 12, 2011.
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 January
11, 2011, NYSE Arca US LLC (the
‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to adopt
Commentary .10 to NYSE Arca Rule 6.4
to allow the Exchange to list and trade
series in intervals of $5 or greater where
the strike price is more than $200 in up
to five (5) option classes on individual
stocks. The text of the proposed rule
change is available at the principal
office of the Exchange, on the
Commission’s Web site at https://
www.sec.gov, at the Commission’s
Public Reference Room, and https://
www.nyse.com.
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.
1 15
2 17
E:\FR\FM\20JAN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 76, No. 13 / Thursday, January 20, 2011 / Notices
in reduced outlays in order to purchase
the option. By way of illustration, using
Google, Inc. (‘‘GOOG’’) as an example, if
GOOG were trading at $610 6 with
approximately one month remaining
A. Self-Regulatory Organization’s
until expiration, the front month (one
Statement of the Purpose of, and
month remaining) at-the-money call
Statutory Basis for, the Proposed Rule
option (the 610 strike) might trade at
Change
approximately $17.50 and the next
1. Purpose
highest available strike (the 620 strike)
might trade at approximately $13.00. By
The purpose of this proposed rule
offering a 615 strike an investor would
change is to adopt Commentary .10 to
be able to trade a GOOG front month
Rule 6.4 to allow the Exchange to list
call option at approximately $15.25,
and trade series in intervals of $5 or
thus providing an additional choice at a
greater where the strike price is more
than $200 in up to five (5) option classes different price point.
Similarly, if an investor wanted to
on individual stocks (‘‘$5 Strike Price
hedge exposure to an underlying stock
Program’’) to provide investors and
position by selling call options, the
traders with additional opportunities
investor may choose an option term
and strategies to hedge high priced
securities, based on a recently approved with two months remaining until
expiration. An additional $5 strike
rule change of NASDAQ OMX PHLX
(‘‘Phlx’’).3 The Exchange also proposes to interval could offer additional and
varying yields to the investor. For
adopt a provision recently adopted for
Phlx that permits the Exchange to list $5 example if Apple, Inc. (‘‘AAPL’’) were
7
strike prices on any other option classes trading at $310 with approximately
two months remaining until expiration,
designated by other securities exchanges
the second month (two months
that employ a $5 Strike Program.4
remaining) at-the-money call option (the
Currently, Rule 6.4(f) permits strike
310 strike) might trade at approximately
price intervals of $10 or greater where
$14.50 and the next highest available
the strike price is greater than $200.5
strike (the 320) strike might trade at
The Exchange is proposing to add the
$9.90. If at expiration the price of AAPL
proposed $5 Strike Program as an
exception to the $10 or greater language closed at $310, the 310 strike call would
in Rule 6.4(f). The proposal would allow have yielded a return of 4.67% and the
320 strike call would have yielded a
the Exchange to list series in intervals
of $5 or greater where the strike price is return of 3.20% over the holding period.
If the 315 strike call were available, that
more than $200 in up to five (5) option
series might be priced at approximately
classes on individual stocks. The
Exchange specifically proposes to create $12.10 (a yield of 3.93% over the
holding period) and would have had a
new Commentary .10 to Rule 6.4 to
lower risk of having the underlying
provide:
stock called away at expiration than that
The Exchange may list series in intervals
of the 310 strike call.
of $5 or greater where the strike price is more
The Exchange is also proposing to
than $200 in up to five (5) option classes on
adopt a provision that options may be
individual stocks. The Exchange may list $5
listed and traded in series that are listed
strike prices above $200 in any other option
classes if those classes are specifically
by other securities exchanges that
designated by other securities exchanges that employ a similar $5 Strike Price
employ a similar $5 Strike Program under
Program, pursuant to the rules of the
their respective rules.
other securities exchange. Similar
The Exchange believes the $5 Strike
reciprocity currently is permitted with
Price Program would offer investors a
the Exchange’s $1 Strike Program, $.50
greater selection of strike prices at a
Strike Program and $2.50 Strike Price
lower cost. For example, if an investor
Program.8
wanted to purchase an option with an
With regard to the impact of this
expiration of approximately one month, proposal on system capacity, the
a $5 strike interval could offer a wider
Exchange has analyzed its capacity and
choice of strike prices, which may result represents that it and the Options Price
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The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
3 See Securities Exchange Act Release No. 63654
(January 6, 2011) (order approving SR–Phlx–2010–
158.
4 See Securities Exchange Act Release No. 63658,
(January 6, 2011) (notice of filing and immediate
effectiveness of SR–Phlx–2011–02).
5 Commentary .05 permits strike intervals of $2.50
or greater where the strike price is $25 or less, and
strike price intervals of $5 or greater where the
strike price is greater than $25.
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6 The prices listed in this example are
assumptions and not based on actual prices. The
assumptions are made for illustrative purposes only
using the stock price as a hypothetical.
7 The prices listed in this example are
assumptions and not based on actual prices. The
assumptions are made for illustrative purposes only
using the stock price as a hypothetical.
8 See Exchange Rule 6.4, Commentary .03 and .04
at (a) and (b)
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3681
Reporting Authority have the necessary
systems capacity to handle the potential
additional traffic associated with the
listing and trading of classes on
individual stocks $5 Strike Price
Program.
The proposed $5 Strike Price Program
would provide investors increased
opportunities to improve returns and
manage risk in the trading of equity
options that overlie high priced stocks.
In addition, the proposed $5 Strike Price
Program would allow investors to
establish equity options positions that
are better tailored to meet their
investment, trading and risk
management requirements.
2. Statutory Basis
The Exchange believes that this
proposed rule change is consistent with
Section 6(b) of the Securities Exchange
Act of 1934 (‘‘Act’’),9 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,10 in particular, in that it is
designed to prevent fraudulent and
manipulative acts and practices,
promote just and equitable principles of
trade, remove impediments to and
perfect the 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 the $5 Strike Price
Program proposal will provide the
investing public and other market
participants increased opportunities
because a $5 series in high priced stocks
will provide market participants
additional opportunities to hedge high
priced securities. This will allow
investors to better manage their risk
exposure, and the Exchange believes the
proposed $5 Strike Price Program would
benefit investors by giving them more
flexibility to closely tailor their
investment decisions in a greater
number of securities. While the $5
Strike Price Program will generate
additional quote traffic, the Exchange
does not believe that this increased
traffic will become unmanageable since
the proposal is limited to a fixed
number of classes. Further, the
Exchange does not believe that the
proposal will result in a material
proliferation of additional series
because it is limited to a fixed number
of classes and the Exchange does not
believe that the additional price points
will result in fractured liquidity.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
9 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
10 15
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Federal Register / Vol. 76, No. 13 / Thursday, January 20, 2011 / Notices
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
Comments may be submitted by any of
the following methods:
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.
• 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–2011–02 on the
subject line.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not significantly affect the
protection of investors or the public
interest, does not impose any significant
burden on competition, and, by its
terms, does not become operative for 30
days from the date on which it was
filed, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 11 and Rule 19b–
4(f)(6) thereunder.12
The Exchange has requested that the
Commission waive the 30-day operative
delay. The Commission believes that
waiver of the operative delay is
consistent with the protection of
investors and the public interest
because the $5 Strike Price Program is
substantially similar to that of another
exchange that is already effective and
operative.13 Therefore, the Commission
designates the proposal operative upon
filing.14
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend 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.
Paper Comments
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.
11 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Commission
has waived the five-day prefiling requirement in
this case.
13 See supra notes 3 and 4.
14 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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12 17
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SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2011–02. 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 website viewing and
printing 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–2011–02 and should be
submitted on or before February 10,
2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–1075 Filed 1–19–11; 8:45 am]
BILLING CODE 8011–01–P
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[Release No. 34–63712; File No. SR–Phlx–
2011–01]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to a
Fee Cap on Dividend, Merger and
Short Stock Interest Strategies
January 12, 2011.
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 January
3, 2011, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
combined fee cap on equity option
transaction charges on dividend,3
merger,4 and short stock interest 5
strategies.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaqtrader.com/
micro.aspx?id=PHLXfilings, at the
principal office of the Exchange, at the
Commission’s Public Reference Room,
and on the Commission’s Web site at
https://www.sec.gov.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 For purposes of this proposal, the Exchange
defines a ‘‘dividend strategy’’ as transactions done
to achieve a dividend arbitrage involving the
purchase, sale and exercise of in-the-money options
of the same class, executed prior to the date on
which the underlying stock goes ex-dividend. See
e.g., Securities Exchange Act Release No. 54174
(July 19, 2006), 71 FR 42156 (July 25, 2006) (SR–
Phlx–2006–40).
4 For purposes of this proposal, the Exchange
defines a ‘‘merger strategy’’ as transactions done to
achieve a merger arbitrage involving the purchase,
sale and exercise of options of the same class and
expiration date, executed prior to the date on which
shareholders of record are required to elect their
respective form of consideration, i.e., cash or stock.
5 For purposes of this proposal, the Exchange
defines a ‘‘short stock interest strategy’’ as
transactions done to achieve a short stock interest
arbitrage involving the purchase, sale and exercise
of in-the-money options of the same class.
2 17
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]]>Agencies
[Federal Register Volume 76, Number 13 (Thursday, January 20, 2011)]
[Notices]
[Pages 3680-3682]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-1075]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63707; File No. SR-NYSEArca-2011-02]
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of Proposed Rule Change by NYSE Arca US LLC To Establish
a $5 Strike Price Program
January 12, 2011.
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 January 11, 2011, NYSE Arca US LLC (the ``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
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 adopt Commentary .10 to NYSE Arca Rule 6.4
to allow the Exchange to list and trade series in intervals of $5 or
greater where the strike price is more than $200 in up to five (5)
option classes on individual stocks. The text of the proposed rule
change is available at the principal office of the Exchange, on the
Commission's Web site at https://www.sec.gov, at the Commission's Public
Reference Room, and https://www.nyse.com.
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.
[[Page 3681]]
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 proposed rule change is to adopt Commentary .10
to Rule 6.4 to allow the Exchange to list and trade series in intervals
of $5 or greater where the strike price is more than $200 in up to five
(5) option classes on individual stocks (``$5 Strike Price Program'')
to provide investors and traders with additional opportunities and
strategies to hedge high priced securities, based on a recently
approved rule change of NASDAQ OMX PHLX (``Phlx'').\3\ The Exchange
also proposes to adopt a provision recently adopted for Phlx that
permits the Exchange to list $5 strike prices on any other option
classes designated by other securities exchanges that employ a $5
Strike Program.\4\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 63654 (January 6,
2011) (order approving SR-Phlx-2010-158.
\4\ See Securities Exchange Act Release No. 63658, (January 6,
2011) (notice of filing and immediate effectiveness of SR-Phlx-2011-
02).
---------------------------------------------------------------------------
Currently, Rule 6.4(f) permits strike price intervals of $10 or
greater where the strike price is greater than $200.\5\ The Exchange is
proposing to add the proposed $5 Strike Program as an exception to the
$10 or greater language in Rule 6.4(f). The proposal would allow the
Exchange to list series in intervals of $5 or greater where the strike
price is more than $200 in up to five (5) option classes on individual
stocks. The Exchange specifically proposes to create new Commentary .10
to Rule 6.4 to provide:
---------------------------------------------------------------------------
\5\ Commentary .05 permits strike intervals of $2.50 or greater
where the strike price is $25 or less, and strike price intervals of
$5 or greater where the strike price is greater than $25.
The Exchange may list series in intervals of $5 or greater where
the strike price is more than $200 in up to five (5) option classes
on individual stocks. The Exchange may list $5 strike prices above
$200 in any other option classes if those classes are specifically
designated by other securities exchanges that employ a similar $5
---------------------------------------------------------------------------
Strike Program under their respective rules.
The Exchange believes the $5 Strike Price Program would offer
investors a greater selection of strike prices at a lower cost. For
example, if an investor wanted to purchase an option with an expiration
of approximately one month, a $5 strike interval could offer a wider
choice of strike prices, which may result in reduced outlays in order
to purchase the option. By way of illustration, using Google, Inc.
(``GOOG'') as an example, if GOOG were trading at $610 \6\ with
approximately one month remaining until expiration, the front month
(one month remaining) at-the-money call option (the 610 strike) might
trade at approximately $17.50 and the next highest available strike
(the 620 strike) might trade at approximately $13.00. By offering a 615
strike an investor would be able to trade a GOOG front month call
option at approximately $15.25, thus providing an additional choice at
a different price point.
---------------------------------------------------------------------------
\6\ The prices listed in this example are assumptions and not
based on actual prices. The assumptions are made for illustrative
purposes only using the stock price as a hypothetical.
---------------------------------------------------------------------------
Similarly, if an investor wanted to hedge exposure to an underlying
stock position by selling call options, the investor may choose an
option term with two months remaining until expiration. An additional
$5 strike interval could offer additional and varying yields to the
investor. For example if Apple, Inc. (``AAPL'') were trading at $310
\7\ with approximately two months remaining until expiration, the
second month (two months remaining) at-the-money call option (the 310
strike) might trade at approximately $14.50 and the next highest
available strike (the 320) strike might trade at $9.90. If at
expiration the price of AAPL closed at $310, the 310 strike call would
have yielded a return of 4.67% and the 320 strike call would have
yielded a return of 3.20% over the holding period. If the 315 strike
call were available, that series might be priced at approximately
$12.10 (a yield of 3.93% over the holding period) and would have had a
lower risk of having the underlying stock called away at expiration
than that of the 310 strike call.
---------------------------------------------------------------------------
\7\ The prices listed in this example are assumptions and not
based on actual prices. The assumptions are made for illustrative
purposes only using the stock price as a hypothetical.
---------------------------------------------------------------------------
The Exchange is also proposing to adopt a provision that options
may be listed and traded in series that are listed by other securities
exchanges that employ a similar $5 Strike Price Program, pursuant to
the rules of the other securities exchange. Similar reciprocity
currently is permitted with the Exchange's $1 Strike Program, $.50
Strike Program and $2.50 Strike Price Program.\8\
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\8\ See Exchange Rule 6.4, Commentary .03 and .04 at (a) and (b)
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With regard to the impact of this proposal on system capacity, the
Exchange has analyzed its capacity and represents that it and the
Options Price Reporting Authority have the necessary systems capacity
to handle the potential additional traffic associated with the listing
and trading of classes on individual stocks $5 Strike Price Program.
The proposed $5 Strike Price Program would provide investors
increased opportunities to improve returns and manage risk in the
trading of equity options that overlie high priced stocks. In addition,
the proposed $5 Strike Price Program would allow investors to establish
equity options positions that are better tailored to meet their
investment, trading and risk management requirements.
2. Statutory Basis
The Exchange believes that this proposed rule change is consistent
with Section 6(b) of the Securities Exchange Act of 1934 (``Act''),\9\
in general, and furthers the objectives of Section 6(b)(5) of the
Act,\10\ in particular, in that it is designed to prevent fraudulent
and manipulative acts and practices, promote just and equitable
principles of trade, remove impediments to and perfect the 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 the
$5 Strike Price Program proposal will provide the investing public and
other market participants increased opportunities because a $5 series
in high priced stocks will provide market participants additional
opportunities to hedge high priced securities. This will allow
investors to better manage their risk exposure, and the Exchange
believes the proposed $5 Strike Price Program would benefit investors
by giving them more flexibility to closely tailor their investment
decisions in a greater number of securities. While the $5 Strike Price
Program will generate additional quote traffic, the Exchange does not
believe that this increased traffic will become unmanageable since the
proposal is limited to a fixed number of classes. Further, the Exchange
does not believe that the proposal will result in a material
proliferation of additional series because it is limited to a fixed
number of classes and the Exchange does not believe that the additional
price points will result in fractured liquidity.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose
[[Page 3682]]
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
Because the foregoing proposed rule change does not significantly
affect the protection of investors or the public interest, does not
impose any significant burden on competition, and, by its terms, does
not become operative for 30 days from the date on which it was filed,
or such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Commission has waived the five-day prefiling requirement in this
case.
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The Exchange has requested that the Commission waive the 30-day
operative delay. The Commission believes that waiver of the operative
delay is consistent with the protection of investors and the public
interest because the $5 Strike Price Program is substantially similar
to that of another exchange that is already effective and
operative.\13\ Therefore, the Commission designates the proposal
operative upon filing.\14\
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\13\ See supra notes 3 and 4.
\14\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2011-02 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2011-02. 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 website
viewing and printing 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-2011-02 and should be submitted on or before February 10,
2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-1075 Filed 1-19-11; 8:45 am]
BILLING CODE 8011-01-P
