Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Proposing To Extend Its Program That Allows Transactions To Take Place at a Price That Is Below $1 per Option Contract Until June 1, 2012, 27122-27123 [2011-11316]

Download as PDF 27122 Federal Register / Vol. 76, No. 90 / Tuesday, May 10, 2011 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64402; File No. SR– NYSEArca–2011–25] 1. Purpose Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Proposing To Extend Its Program That Allows Transactions To Take Place at a Price That Is Below $1 per Option Contract Until June 1, 2012 May 4, 2011. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on May 2, 2011, NYSE Arca, Inc. (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 extend its program that allows transactions to take place at a price that is below $1 per option contract until June 1, 2012. The text of the proposed rule change is available at the Exchange, at http:// www.nyse.com, at the Commission’s Public Reference Room, and on the Commission’s Web site at http:// www.sec.gov. jlentini on DSKJ8SOYB1PROD with NOTICES II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of 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. 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 4 See Securities Exchange Act Release No. 63476 (December 8, 2010), 75 FR 77930 (December 14, 2010) (SR–NYSE Arca-2010–109). 2 15 VerDate Mar<15>2010 18:02 May 09, 2011 The purpose of this filing is to extend the Pilot Program 4 under Rule 6.80 to allow accommodation transactions (‘‘Cabinet Trades’’) to take place at a price that is below $1 per option contract to June 1, 2012. The Exchange proposes to extend the program for one year. An ‘‘accommodation’’ or ‘‘cabinet’’ trade refers to trades in listed options on the Exchange that are worthless or not actively traded. Cabinet trading is generally conducted in accordance with the Exchange Rules, except as provided in Exchange Rule 6.80 Accommodation Transactions (Cabinet Trades), which sets forth specific procedures for engaging in cabinet trades. Rule 6.80 currently provides for cabinet transactions to occur via open outcry at a cabinet price of a $1 per option contract in any options series open for trading in the Exchange, except that the Rule is not applicable to trading in option classes participating in the Penny Pilot Program. Under the procedures, bids and offers (whether opening or closing a position) at a price of $1 per option contract may be represented in the trading crowd by a Floor Broker or by a Market-Maker or provided in response to a request by a Trading Official, a Floor Broker or a Market-Maker, but must yield priority to all resting orders in the Cabinet (those orders held by the Trading Official, and which resting cabinet orders may be closing only). So long as both the buyer and the seller yield to orders resting in the cabinet book, opening cabinet bids can trade with opening cabinet offers at $1 per option contract. The Exchange has temporarily amended the procedures through June 1, 2011 to allow transactions to take place in open outcry at a price of at least $0 but less than $1 per option contract. These lower priced transactions are permitted to be traded pursuant to the same procedures applicable to $1 cabinet trades, except that (i) bids and offers for opening transactions are only permitted to accommodate closing transactions in order to limit use of the procedure to liquidations of existing positions, and (ii) the procedures are also made available for trading in option classes participating in the Penny Pilot Jkt 223001 PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 Program.5 The Exchange believes that allowing a price of at least $0 but less than $1 better accommodates the closing of options positions in series that are worthless or not actively traded, particularly due to recent market conditions which have resulted in a significant number of series being outof-the-money. For example, a market participant might have a long position in a call series with a strike price of $100 and the underlying stock might be trading at $30. In such an instance, there might not otherwise be a market for that person to close-out the position even at the $1 cabinet price (e.g., the series might be quoted no bid). As with other accommodation liquidations under Rule 6.80, transactions that occur for less than $1 will not be disseminated to the public on the consolidated tape. In addition, as with other accommodation liquidations under Rule 6.80, the transactions will be exempt from the Consolidated Options Audit Trail (‘‘COATS’’) requirements of Exchange Rule 6.67 Order Format and System Entry Requirements. However, the Exchange will maintain quotation, order and transaction information for the transactions in the same format as the COATS data is maintained. In this regard, all transactions for less than $1 must be reported to the Exchange following the close of each business day. 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’’),6 in general, and furthers the objectives of Section 6(b)(5) of the Act 7 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 that allowing for liquidations at a price less than $1 per option contract will better facilitate the 5 Currently the $1 cabinet trading procedures are limited to options classes traded in $0.05 or $0.10 standard increment. The $1 cabinet trading procedures are not available in Penny Pilot Program classes because in those classes an option series can trade in a standard increment as low as $0.01 per share (or $1.00 per option contract with a 100 share multiplier). Because the temporary procedures allow trading below $0.01 per share (or $1.00 per option contract with a 100 share multiplier), the procedures are available for all classes, including those classes participating in the Penny Pilot Program. 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(5). E:\FR\FM\10MYN1.SGM 10MYN1 Federal Register / Vol. 76, No. 90 / Tuesday, May 10, 2011 / Notices closing of options positions that are worthless or not actively trading, especially in Penny Pilot issues where Cabinet Trades are not otherwise permitted. 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 The Exchange has filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 8 and Rule 19b–4(f)(6) thereunder.9 Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) 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 19(b)(3)(A) of the Act 10 and Rule 19b–4(f)(6) thereunder.11 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: 8 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file 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. NYSE Arca has satisfied this requirement. jlentini on DSKJ8SOYB1PROD with NOTICES 9 17 VerDate Mar<15>2010 18:02 May 09, 2011 Jkt 223001 Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NYSEArca–2011–25 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. 27123 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64397; File No. SR–FINRA– 2011–019] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Rename the OTC Bulletin Board in the FINRA Rulebook May 4, 2011. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on April 25, 2011, Financial Industry All submissions should refer to File Regulatory Authority, Inc. (‘‘FINRA’’) Number SR–NYSEArca–2011–25. This filed with the Securities and Exchange file number should be included on the Commission (‘‘SEC’’ or ‘‘Commission’’) subject line if e-mail is used. To help the the proposed rule change as described Commission process and review your in Items I and II below, which Items comments more efficiently, please use have been prepared by FINRA. FINRA only one method. The Commission will has designated the proposed rule change post all comments on the Commission’s as constituting a ‘‘non-controversial’’ Internet Web site (http://www.sec.gov/ rule change under paragraph (f)(6) of rules/sro.shtml). Copies of the Rule 19b–4 under the Exchange Act,3 submission, all subsequent which renders the proposal effective amendments, all written statements upon receipt of this filing by the with respect to the proposed rule Commission. The Commission is change that are filed with the publishing this notice to solicit Commission, and all written comments on the proposed rule change communications relating to the from interested persons. proposed rule change between the I. Self-Regulatory Organization’s Commission and any person, other than Statement of the Terms of Substance of those that may be withheld from the the Proposed Rule Change public in accordance with the FINRA is proposing to amend FINRA provisions of 5 U.S.C. 552, will be Rule 6500 Series and Rules 7700, 7720 available for Web site viewing and and 7740 to replace references to ‘‘OTC printing in the Commission’s Public Bulletin Board’’ and ‘‘OTCBB’’ with Reference Room, 100 F Street, NE., ‘‘Non-NMS Quotation Service’’ and Washington, DC 20549, on official ‘‘NNQS.’’ business days between the hours of 10 The text of the proposed rule change a.m. and 3 p.m. Copies of such filing is available on FINRA’s Web site at also will be available for inspection and http://www.finra.org, at the principal copying at the principal office of the office of FINRA, at the Commission’s Exchange. All comments received will Public Reference Room, and on the be posted without change; the Commission’s Web site at http:// Commission does not edit personal www.sec.gov. identifying information from II. Self-Regulatory Organization’s submissions. You should submit only Statement of the Purpose of, and information that you wish to make Statutory Basis for, the Proposed Rule available publicly. All submissions Change should refer to File Number SR– In its filing with the Commission, NYSEArca–2011–25 and should be FINRA included statements concerning submitted on or before May 31, 2011. the purpose of and basis for the For the Commission, by the Division of proposed rule change and discussed any Trading and Markets, pursuant to delegated comments it received on the proposed authority.12 rule change. The text of these statements Elizabeth M. Murphy, may be examined at the places specified Secretary. in Item IV below. FINRA has prepared summaries, set forth in sections A, B, [FR Doc. 2011–11316 Filed 5–9–11; 8:45 am] BILLING CODE 8011–01–P 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 17 CFR 240.19b–4(f)(6). 2 17 12 17 PO 00000 CFR 200.30–3(a)(12). Frm 00123 Fmt 4703 Sfmt 4703 E:\FR\FM\10MYN1.SGM 10MYN1

Agencies

[Federal Register Volume 76, Number 90 (Tuesday, May 10, 2011)]
[Notices]
[Pages 27122-27123]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-11316]



[[Page 27122]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64402; File No. SR-NYSEArca-2011-25]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Proposing To Extend 
Its Program That Allows Transactions To Take Place at a Price That Is 
Below $1 per Option Contract Until June 1, 2012

May 4, 2011.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on May 2, 2011, NYSE Arca, Inc. (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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to extend its program that allows 
transactions to take place at a price that is below $1 per option 
contract until June 1, 2012. The text of the proposed rule change is 
available at the Exchange, at http://www.nyse.com, at the Commission's 
Public Reference Room, and on the Commission's Web site at http://www.sec.gov.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of 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 extend the Pilot Program \4\ under 
Rule 6.80 to allow accommodation transactions (``Cabinet Trades'') to 
take place at a price that is below $1 per option contract to June 1, 
2012. The Exchange proposes to extend the program for one year.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 63476 (December 8, 
2010), 75 FR 77930 (December 14, 2010) (SR-NYSE Arca-2010-109).
---------------------------------------------------------------------------

    An ``accommodation'' or ``cabinet'' trade refers to trades in 
listed options on the Exchange that are worthless or not actively 
traded. Cabinet trading is generally conducted in accordance with the 
Exchange Rules, except as provided in Exchange Rule 6.80 Accommodation 
Transactions (Cabinet Trades), which sets forth specific procedures for 
engaging in cabinet trades. Rule 6.80 currently provides for cabinet 
transactions to occur via open outcry at a cabinet price of a $1 per 
option contract in any options series open for trading in the Exchange, 
except that the Rule is not applicable to trading in option classes 
participating in the Penny Pilot Program. Under the procedures, bids 
and offers (whether opening or closing a position) at a price of $1 per 
option contract may be represented in the trading crowd by a Floor 
Broker or by a Market-Maker or provided in response to a request by a 
Trading Official, a Floor Broker or a Market-Maker, but must yield 
priority to all resting orders in the Cabinet (those orders held by the 
Trading Official, and which resting cabinet orders may be closing 
only). So long as both the buyer and the seller yield to orders resting 
in the cabinet book, opening cabinet bids can trade with opening 
cabinet offers at $1 per option contract.
    The Exchange has temporarily amended the procedures through June 1, 
2011 to allow transactions to take place in open outcry at a price of 
at least $0 but less than $1 per option contract. These lower priced 
transactions are permitted to be traded pursuant to the same procedures 
applicable to $1 cabinet trades, except that (i) bids and offers for 
opening transactions are only permitted to accommodate closing 
transactions in order to limit use of the procedure to liquidations of 
existing positions, and (ii) the procedures are also made available for 
trading in option classes participating in the Penny Pilot Program.\5\ 
The Exchange believes that allowing a price of at least $0 but less 
than $1 better accommodates the closing of options positions in series 
that are worthless or not actively traded, particularly due to recent 
market conditions which have resulted in a significant number of series 
being out-of-the-money. For example, a market participant might have a 
long position in a call series with a strike price of $100 and the 
underlying stock might be trading at $30. In such an instance, there 
might not otherwise be a market for that person to close-out the 
position even at the $1 cabinet price (e.g., the series might be quoted 
no bid).
---------------------------------------------------------------------------

    \5\ Currently the $1 cabinet trading procedures are limited to 
options classes traded in $0.05 or $0.10 standard increment. The $1 
cabinet trading procedures are not available in Penny Pilot Program 
classes because in those classes an option series can trade in a 
standard increment as low as $0.01 per share (or $1.00 per option 
contract with a 100 share multiplier). Because the temporary 
procedures allow trading below $0.01 per share (or $1.00 per option 
contract with a 100 share multiplier), the procedures are available 
for all classes, including those classes participating in the Penny 
Pilot Program.
---------------------------------------------------------------------------

    As with other accommodation liquidations under Rule 6.80, 
transactions that occur for less than $1 will not be disseminated to 
the public on the consolidated tape. In addition, as with other 
accommodation liquidations under Rule 6.80, the transactions will be 
exempt from the Consolidated Options Audit Trail (``COATS'') 
requirements of Exchange Rule 6.67 Order Format and System Entry 
Requirements. However, the Exchange will maintain quotation, order and 
transaction information for the transactions in the same format as the 
COATS data is maintained. In this regard, all transactions for less 
than $1 must be reported to the Exchange following the close of each 
business day.
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''),\6\ 
in general, and furthers the objectives of Section 6(b)(5) of the Act 
\7\ 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 that allowing 
for liquidations at a price less than $1 per option contract will 
better facilitate the

[[Page 27123]]

closing of options positions that are worthless or not actively 
trading, especially in Penny Pilot issues where Cabinet Trades are not 
otherwise permitted.
---------------------------------------------------------------------------

    \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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\ 
Because the foregoing proposed rule change does not: (i) Significantly 
affect the protection of investors or the public interest; (ii) impose 
any significant burden on competition; and (iii) 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 
19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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. 
NYSE Arca has satisfied this requirement.
---------------------------------------------------------------------------

    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 (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2011-25 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-2011-25. 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 (http://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, 100 F 
Street, NE., Washington, DC 20549, on official business days between 
the hours of 10 a.m. and 3 p.m. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSEArca-2011-25 and should be submitted on or before May 31, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-11316 Filed 5-9-11; 8:45 am]
BILLING CODE 8011-01-P