Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Rules 5.30 and 5.32 To Permit the Exchange To List Flexible Exchange Options on Index and Equity Securities That Are Eligible for Non-FLEX Options Trading, and That Have Non-FLEX Options on Such Index and Equity Securities Listed and Traded on at Least One National Securities Exchange, Even if the Exchange Does Not List Such Non-FLEX Options, 36604-36606 [2011-15606]
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36604
Federal Register / Vol. 76, No. 120 / Wednesday, June 22, 2011 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64692; File No. SR–
NYSEArca–2011–37]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending Rules 5.30 and
5.32 To Permit the Exchange To List
Flexible Exchange Options on Index
and Equity Securities That Are Eligible
for Non-FLEX Options Trading, and
That Have Non-FLEX Options on Such
Index and Equity Securities Listed and
Traded on at Least One National
Securities Exchange, Even if the
Exchange Does Not List Such NonFLEX Options
June 16, 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 June 3,
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 self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
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I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to amend
Rules 5.30 and 5.32 to permit the
Exchange to list Flexible Exchange
Options (‘‘FLEX Options’’) on index and
equity securities that are eligible for
Non-FLEX Options trading, and that
have Non-FLEX Options on such index
and equity securities listed and traded
on at least one national securities
exchange, even if the Exchange does not
list such Non-FLEX Options. The text of
the proposed rule change is available at
the Exchange, 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
1 15
U.S.C.78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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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 Exchange is proposing to amend
Rule 5.30 Applicability, Definitions, and
References, and Rule 5.32, Terms of
FLEX Options, to delete obsolete
references and to permit trading of
FLEX Options series in securities whose
Non-FLEX Options are listed and traded
on a national securities exchange(s),
based on a recently adopted rule change
of the Chicago Board Options Exchange
(‘‘CBOE’’).4
Rules 5.30(a)(1) and 5.32(e)(1)
currently permit FLEX Index Options on
only four specific indexes, none of
which are currently listed or traded on
the Exchange. In addition, Rule
5.30(a)(2) currently permits FLEX
Options on only one Exchange-Traded
Fund Share (‘‘ETF’’). The Commission
originally only approved trading of
FLEX Options on a limited number of
index products,5 prior to approval of
generic listing standards for index
options, and the Exchange adopted rule
text in a rule filing that restricted FLEX
options to only one ETF, despite other
general rule language in that rule filing
that permitted FLEX options on any
ETF.6 In 2004, the Exchange had, in
fact, deleted the references to specific
indexes and to a specific ETF in the
rules noted above,7 but inadvertently
reinstated the deleted text in a
contemporaneous filing.8 Subsequent
4 See Securities Exchange Act Release No. 60585
(August 28, 2009), 74 FR 46257 (September 8,
2009). Unlike CBOE’s rule, we have clarified that
our proposed rule would only permit the trading of
FLEX Options on securities whose Non-Flex
Options are listed and traded on at least one options
exchange.
5 See Securities Exchange Act Release No. 34364
(July 13, 1994), 59 FR 36813 (July 19, 1994).
6 See Exchange Act Release No. 34–44025
(February 28, 2001), 66 FR 13986 (March 8, 2001).
In particular, as part of this rule filing, the Exchange
adopted the following rule text in Rule 8.102(f)(1),
‘‘FLEX Equity Option transactions are limited to
transactions in options on underlying securities or
Exchange-Traded Fund Shares that have been
approved by the Exchange in accordance with Rule
3.6.’’ Rule 8.102 was subsequently renumbered as
Rule 5.32.
7 See Securities Exchange Act Release No. 49340
(February 27, 2004), 69 FR 10804 (March 8, 2004)
(Notice of Filing and Immediate Effectiveness of
PCX–2004–06).
8 See Securities Exchange Act Release No. 49718
(May 17, 2004), 69 FR 29611 (May 24, 2004) (Order
Approving PCX–2004–08).
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listing of options on other index
products did not include updating the
relevant rule text in Rules 5.30 or 5.32.
The deletion of the restrictive
language in Rules 5.30 and 5.32 will be
accompanied by the adoption of new
rule text, by which the Exchange is
proposing to adopt a rule change similar
to a rule change recently adopted by the
CBOE to allow FLEX Equity Options 9
on any security that meets the standards
of NYSE Arca Rule 5.3, and that has
Non-FLEX Options on such security
listed and traded on at least one options
exchange, regardless of whether the
Exchange trades such Non-FLEX
Options.
Similarly, the CBOE rule change also
adopted a provision to allow FLEX
Index Options on any index that meets
its listing standards. NYSE Arca
proposes to adopt a similar provision
that would permit FLEX Index Options
on any index that meets the standards
of Rule 5.12 or 5.13, and that has NonFLEX Options on such index listed and
traded on at least one options exchange,
even if the Exchange does not list and
trade such Non-FLEX Options.
As an alternative to the over-thecounter marketplace and other national
security exchanges, the Exchange
proposes in this rule filing to increase
the spectrum of indexes and equity
securities that are eligible for FLEX
Options trading on the Exchange, even
if the Exchange does not list Non-FLEX
Options on such indexes or equity
securities. In this regard, the Exchange
does not list options on every NMS
stock or index that is eligible for options
trading, even if permitted to do so
according to its listing standards, but
recognizes that market participants may
want access to options on such indexes
and equity securities, subject to the
certainty and safeguards that a regulated
and standardized marketplace provides.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with Section
6(b) of the Act 10 in general, and furthers
the objectives of Section 6(b)(5) of the
Act, in that it is designed to promote
just and equitable principles of trade,
remove impediments to and perfect the
mechanisms 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 its proposal to permit the Exchange
to list FLEX Options on indexes and
equity securities that are eligible for
9 The Commission notes that options on ETFs, as
discussed above, are considered FLEX Equity
Options under NYSE Arca’s rules. See NYSE Arca
Rule 5.30(b)(5).
10 15 U.S.C. 78f(b).
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Federal Register / Vol. 76, No. 120 / Wednesday, June 22, 2011 / Notices
Non-FLEX Options trading and whose
Non-FLEX Options are listed and traded
on at least one national securities
exchange, even if the Exchange does not
list such Non-FLEX Options, would
provide market participants with
additional means to manage their risk
exposures and carry out their
investment objectives with listed
options. In this regard, the Exchange’s
proposal would increase competition in
the FLEX Options market. In addition,
the Exchange’s proposal is consistent
with investor protection and the public
interest in that it is limited to FLEX
Options on securities that would be
eligible to have, and in fact have, NonFLEX Options listed and traded on
them. The criteria for such underlying
securities has been carefully crafted
over the years to ensure that only
appropriate securities have standardized
options listed on them (e.g., securities
with sufficient trading volume and
shareholders).
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
Because the proposed rule change: (i)
Does not significantly affect the
protection of investors or the public
interest; (ii) does not impose any
significant burden on competition; and
(iii) does not become operative for 30
days after the date of the filing, or such
shorter time as the Commission may
designate if consistent with the
protection of investors and the public
interest, the proposed rule change 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).
CFR 240.19b–4(f)(6). Pursuant to Rule 19b–
4(f)(6)(iii) under the Act, the Exchange is required
to give the Commission written notice of its 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
notes that the Exchange has satisfied this
requirement.
12 17
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A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 13 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 14
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has
requested that the Commission waive
the 30-day operative delay so that the
Exchange could immediately list FLEX
Options on indexes and equity
securities that are eligible for non-FLEX
Options trading, and that have nonFLEX Options on such index and equity
securities listed and traded on at least
one national securities exchange, even if
the Exchange does not list non-FLEX
Options on such indexes and equity
securities. In support of the waiver, the
Exchange believes that its proposal is
consistent with CBOE’s rules, which
were previously published for public
comment, and would allow the
Exchange to immediately compete with
other exchanges for the trading of such
FLEX Options.
The Commission believes that waiver
of the operative delay is consistent with
the protection of investors and the
public interest. In making this
determination, the Commission notes
that NYSE Arca’s proposed rule change
is substantially similar to CBOE’s FLEX
rules, which also permit CBOE to list
FLEX options on securities that are
eligible for non-FLEX options trading,
even if CBOE does not list non-FLEX
options on such securities.15 The
Commission notes that the CBOE’s
proposal was subject to full notice and
comment, and the Commission received
no comments on CBOE’s rule proposal.
Further, the Commission notes that
NYSE Arca’s proposal adds clarification
to the rules, noting expressly that its
rules would only permit the trading of
FLEX Options on securities whose nonFLEX Options are listed and traded on
at least one national securities
exchange. This provision will help to
ensure that adequate exchange
requirements are met for trading these
products and that the FLEX market will
provide an alternative to certain
investors that want to customize
specified options terms not available in
the standardized market. In addition to
the factors noted above, the Commission
also believes that waiver of the
operative delay will allow the NYSE
Arca to immediately compete with other
exchanges for the trading of such FLEX
options, thereby providing investors
13 17
CFR 240.19b–4(f)(6).
14 17 CFR 240.19b–4(f)(6)(iii).
15 See supra note 4.
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36605
another venue on which to trade these
products. For these reasons, the
Commission designates, consistent with
the protection of investors and the
public interest, that the proposed rule
change become operative immediately
upon filing.16
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend the 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 rulecomments@sec.gov. Please include File
No. SR–NYSEArca–2011–37 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 No.
SR–NYSEArca–2011–37. 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
16 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. 15 U.S.C. 78c(f).
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36606
Federal Register / Vol. 76, No. 120 / Wednesday, June 22, 2011 / Notices
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 No. SR–NYSEArca–
2011–37 and should be submitted on or
before July 13, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–15606 Filed 6–21–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–64688; File No. SR–Phlx–
2011–56]
Self-Regulatory Organizations; The
NASDAQ OMX PHLX LLC; Order
Granting Approval of Proposed Rule
Change Establishing a Qualified
Contingent Cross Order for Execution
on the Floor of the Exchange
June 16, 2011.
I. Introduction
On May 4, 2011, NASDAQ OMX
PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to establish a qualified
contingent cross order for execution on
the floor of the Exchange (‘‘Floor QCC
Order’’). The proposed rule change was
published in the Federal Register on
May 12, 2011.3 The Commission
received one comment letter on the
proposal.4 Phlx submitted a comment
response letter on June 3, 2011.5 This
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 64415
(May 5, 2011), 76 FR 27732 (‘‘Notice’’).
4 See Letter to Elizabeth M. Murphy, Secretary,
Commission, from Michael J. Simon, Secretary,
International Securities Exchange (‘‘ISE’’), dated
May 27, 2011 (‘‘ISE Letter’’).
5 See Letter to Elizabeth M. Murphy, Secretary,
Commission, from Jeffrey S. Davis, Vice President
and Deputy General Counsel, Phlx, dated June 3,
2011 (‘‘Phlx Response Letter’’).
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1 15
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order grants approval of the proposed
rule change.
II. Description of the Proposal
Phlx proposes to amend Rule 1064 to
establish a Floor QCC Order type.6
As proposed, the Floor QCC Order
would be required to: (i) Be for at least
1,000 contracts, (ii) meet the six
requirements of Phlx Rule 1080(o)(3),7
(iii) be executed at a price at or between
the National Best Bid and Offer
(‘‘NBBO’’); and (iv) be rejected if a
Customer order is resting on the
Exchange book at the same price.
Specifically, proposed Phlx Rule
1064(e) would provide that Floor QCC
Orders may be immediately executed
upon entry into the system by an
Options Floor Brokers and without
exposure if no Customer Orders 8 exist
on the Exchange’s order book at the
same price.
Floor QCC Orders would be
electronically entered by an Options
Floor Broker on the floor of the
Exchange using the Floor Broker
Management System (‘‘FBMS’’) and the
orders would then be executed
electronically. Only Options Floor
Brokers would be permitted to enter
Floor QCC Orders. In addition, under
proposed Rule 1064(e)(2), Options Floor
6 Phlx established an electronic QCC Order set
forth in PHLX Rule 1080(o). See Securities
Exchange Act Release No. 64249 (April 7, 2011), 76
FR 20773 (April 13, 2011) (SR–Phlx–2011–047).
7 Phlx Rule 1080(o)(3) defines a qualified
contingent cross trade substantively identical to the
Commission’s definition in the QCT Release. A
qualified contingent cross trade must meet the
following conditions: (i) At least one component
must be an NMS stock, as defined in Rule 600 of
Regulation NMS, 17 CFR 242.600; (ii) all
components must be effected with a product or
price contingency that either has been agreed to by
all the respective counterparties or arranged for by
a broker-dealer as principal or agent; (iii) the
execution of one component must be contingent
upon the execution of all other components at or
near the same time; (iv) the specific relationship
between the component orders (e.g., the spread
between the prices of the component orders) is
determined by the time the contingent order is
placed; (v) the component orders must bear a
derivative relationship to one another, represent
different classes of shares of the same issuer, or
involve the securities of participants in mergers or
with intentions to merge that have been announced
or cancelled; and (vi) the transaction must be fully
hedged (without regard to any prior existing
position) as a result of other components of the
contingent trade. The Commission has granted an
exemption for QCTs that meet certain requirements
from Rule 611(a) of Regulation NMS, 17 CFR
242.611(a) (‘‘QCT Exemption’’). See Securities
Exchange Act Release No. 57620 (April 4, 2008), 73
FR 19271 (April 9, 2008) (‘‘QCT Release,’’ which
supersedes a release initially granting the QCT
exemption, Securities Exchange Act Release No.
54389 (August 31, 2006), 71 FR 52829 (September
7, 2006) (‘‘Original QCT Release’’)).
8 Phlx would reject Floor QCC Orders that
attempt to execute when any Customer Orders are
resting on the Exchange limit order book at the
same price.
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Brokers would be prohibited from
entering Floor QCC Orders for their own
accounts, the account of an associated
person, or an account with respect to
which it or an associated person thereof
exercises investment discretion. The
Exchange notes that the restrictions set
forth in proposed Rule 1064(e)(2) do not
limit in any way the obligation of
Options Floor Brokers and other
Exchange members to comply with
Section 11(a) or the rules thereunder.9
Additionally, the Exchange proposes
to modify subsections (a), (b), and (c) of
Rule 1064 to establish that the
requirements applicable to Floor QCC
Orders that are set forth in new
subsection (e) are distinct from those
applicable to the orders described in
such subsections.
III. Comment Letter
One commenter raised an objection to
the proposal.10 The commenter
questioned the ability of a floor-based
exchange to verify that there is not a
customer order on the book at the price
as a Floor QCC Order at the time of
execution.11 The commenter argued that
in an electronic trading environment, an
exchange’s systems can automatically
determine if there is a customer order
on the book before a Floor QCC Order
is executed.12 The commenter stated
that how this function would be
performed on a floor-based exchange
should be clarified, as well as what the
time of execution would be for a floorbased trade.13 The commenter argued
that ‘‘[a]llowing a QCC to be
implemented in a non-automated
environment without a systemic check
of whether there is a customer order on
the book at the time of execution would
effectively eliminate the protections
guaranteed in an all electronic trading
environment, thus returning [the
exchanges] to the unequal competitive
environment from which the ISE’s QCC
proposal originated.’’ 14
In its letter, Phlx responded to the
issues raised in the ISE Letter and
explained that, even when Floor QCC
Orders are entered by the Options Floor
Broker, they are submitted
electronically to the Phlx order book
where a systemic check would be
performed to determine whether a
customer order is resting on the book at
9 Proposed Rule 1064(e)(2) would also require
Options Floor Brokers to maintain books and
records demonstrating that no Floor QCC Order was
entered by an Options Floor Broker in such a
prohibited account.
10 See note 4, supra.
11 See ISE Letter.
12 Id.
13 Id.
14 Id.
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]]>Agencies
[Federal Register Volume 76, Number 120 (Wednesday, June 22, 2011)]
[Notices]
[Pages 36604-36606]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-15606]
[[Page 36604]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64692; File No. SR-NYSEArca-2011-37]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Amending Rules 5.30
and 5.32 To Permit the Exchange To List Flexible Exchange Options on
Index and Equity Securities That Are Eligible for Non-FLEX Options
Trading, and That Have Non-FLEX Options on Such Index and Equity
Securities Listed and Traded on at Least One National Securities
Exchange, Even if the Exchange Does Not List Such Non-FLEX Options
June 16, 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 June 3, 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 self-regulatory
organization. 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to amend Rules 5.30 and 5.32 to permit the
Exchange to list Flexible Exchange Options (``FLEX Options'') on index
and equity securities that are eligible for Non-FLEX Options trading,
and that have Non-FLEX Options on such index and equity securities
listed and traded on at least one national securities exchange, even if
the Exchange does not list such Non-FLEX Options. The text of the
proposed rule change is available at the Exchange, 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. 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 Exchange is proposing to amend Rule 5.30 Applicability,
Definitions, and References, and Rule 5.32, Terms of FLEX Options, to
delete obsolete references and to permit trading of FLEX Options series
in securities whose Non-FLEX Options are listed and traded on a
national securities exchange(s), based on a recently adopted rule
change of the Chicago Board Options Exchange (``CBOE'').\4\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 60585 (August 28,
2009), 74 FR 46257 (September 8, 2009). Unlike CBOE's rule, we have
clarified that our proposed rule would only permit the trading of
FLEX Options on securities whose Non-Flex Options are listed and
traded on at least one options exchange.
---------------------------------------------------------------------------
Rules 5.30(a)(1) and 5.32(e)(1) currently permit FLEX Index Options
on only four specific indexes, none of which are currently listed or
traded on the Exchange. In addition, Rule 5.30(a)(2) currently permits
FLEX Options on only one Exchange-Traded Fund Share (``ETF''). The
Commission originally only approved trading of FLEX Options on a
limited number of index products,\5\ prior to approval of generic
listing standards for index options, and the Exchange adopted rule text
in a rule filing that restricted FLEX options to only one ETF, despite
other general rule language in that rule filing that permitted FLEX
options on any ETF.\6\ In 2004, the Exchange had, in fact, deleted the
references to specific indexes and to a specific ETF in the rules noted
above,\7\ but inadvertently reinstated the deleted text in a
contemporaneous filing.\8\ Subsequent listing of options on other index
products did not include updating the relevant rule text in Rules 5.30
or 5.32.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 34364 (July 13,
1994), 59 FR 36813 (July 19, 1994).
\6\ See Exchange Act Release No. 34-44025 (February 28, 2001),
66 FR 13986 (March 8, 2001). In particular, as part of this rule
filing, the Exchange adopted the following rule text in Rule
8.102(f)(1), ``FLEX Equity Option transactions are limited to
transactions in options on underlying securities or Exchange-Traded
Fund Shares that have been approved by the Exchange in accordance
with Rule 3.6.'' Rule 8.102 was subsequently renumbered as Rule
5.32.
\7\ See Securities Exchange Act Release No. 49340 (February 27,
2004), 69 FR 10804 (March 8, 2004) (Notice of Filing and Immediate
Effectiveness of PCX-2004-06).
\8\ See Securities Exchange Act Release No. 49718 (May 17,
2004), 69 FR 29611 (May 24, 2004) (Order Approving PCX-2004-08).
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The deletion of the restrictive language in Rules 5.30 and 5.32
will be accompanied by the adoption of new rule text, by which the
Exchange is proposing to adopt a rule change similar to a rule change
recently adopted by the CBOE to allow FLEX Equity Options \9\ on any
security that meets the standards of NYSE Arca Rule 5.3, and that has
Non-FLEX Options on such security listed and traded on at least one
options exchange, regardless of whether the Exchange trades such Non-
FLEX Options.
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\9\ The Commission notes that options on ETFs, as discussed
above, are considered FLEX Equity Options under NYSE Arca's rules.
See NYSE Arca Rule 5.30(b)(5).
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Similarly, the CBOE rule change also adopted a provision to allow
FLEX Index Options on any index that meets its listing standards. NYSE
Arca proposes to adopt a similar provision that would permit FLEX Index
Options on any index that meets the standards of Rule 5.12 or 5.13, and
that has Non-FLEX Options on such index listed and traded on at least
one options exchange, even if the Exchange does not list and trade such
Non-FLEX Options.
As an alternative to the over-the-counter marketplace and other
national security exchanges, the Exchange proposes in this rule filing
to increase the spectrum of indexes and equity securities that are
eligible for FLEX Options trading on the Exchange, even if the Exchange
does not list Non-FLEX Options on such indexes or equity securities. In
this regard, the Exchange does not list options on every NMS stock or
index that is eligible for options trading, even if permitted to do so
according to its listing standards, but recognizes that market
participants may want access to options on such indexes and equity
securities, subject to the certainty and safeguards that a regulated
and standardized marketplace provides.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Act \10\ in general, and furthers the objectives of
Section 6(b)(5) of the Act, in that it is designed to promote just and
equitable principles of trade, remove impediments to and perfect the
mechanisms 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 its proposal to permit the Exchange to list FLEX Options
on indexes and equity securities that are eligible for
[[Page 36605]]
Non-FLEX Options trading and whose Non-FLEX Options are listed and
traded on at least one national securities exchange, even if the
Exchange does not list such Non-FLEX Options, would provide market
participants with additional means to manage their risk exposures and
carry out their investment objectives with listed options. In this
regard, the Exchange's proposal would increase competition in the FLEX
Options market. In addition, the Exchange's proposal is consistent with
investor protection and the public interest in that it is limited to
FLEX Options on securities that would be eligible to have, and in fact
have, Non-FLEX Options listed and traded on them. The criteria for such
underlying securities has been carefully crafted over the years to
ensure that only appropriate securities have standardized options
listed on them (e.g., securities with sufficient trading volume and
shareholders).
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\10\ 15 U.S.C. 78f(b).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change: (i) Does not significantly affect
the protection of investors or the public interest; (ii) does not
impose any significant burden on competition; and (iii) does not become
operative for 30 days after the date of the filing, or such shorter
time as the Commission may designate if consistent with the protection
of investors and the public interest, the proposed rule change 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). Pursuant to Rule 19b-4(f)(6)(iii)
under the Act, the Exchange is required to give the Commission
written notice of its 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 notes that the Exchange has satisfied this
requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \13\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \14\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay so
that the Exchange could immediately list FLEX Options on indexes and
equity securities that are eligible for non-FLEX Options trading, and
that have non-FLEX Options on such index and equity securities listed
and traded on at least one national securities exchange, even if the
Exchange does not list non-FLEX Options on such indexes and equity
securities. In support of the waiver, the Exchange believes that its
proposal is consistent with CBOE's rules, which were previously
published for public comment, and would allow the Exchange to
immediately compete with other exchanges for the trading of such FLEX
Options.
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\13\ 17 CFR 240.19b-4(f)(6).
\14\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiver of the operative delay is
consistent with the protection of investors and the public interest. In
making this determination, the Commission notes that NYSE Arca's
proposed rule change is substantially similar to CBOE's FLEX rules,
which also permit CBOE to list FLEX options on securities that are
eligible for non-FLEX options trading, even if CBOE does not list non-
FLEX options on such securities.\15\ The Commission notes that the
CBOE's proposal was subject to full notice and comment, and the
Commission received no comments on CBOE's rule proposal. Further, the
Commission notes that NYSE Arca's proposal adds clarification to the
rules, noting expressly that its rules would only permit the trading of
FLEX Options on securities whose non-FLEX Options are listed and traded
on at least one national securities exchange. This provision will help
to ensure that adequate exchange requirements are met for trading these
products and that the FLEX market will provide an alternative to
certain investors that want to customize specified options terms not
available in the standardized market. In addition to the factors noted
above, the Commission also believes that waiver of the operative delay
will allow the NYSE Arca to immediately compete with other exchanges
for the trading of such FLEX options, thereby providing investors
another venue on which to trade these products. For these reasons, the
Commission designates, consistent with the protection of investors and
the public interest, that the proposed rule change become operative
immediately upon filing.\16\
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\15\ See supra note 4.
\16\ 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. 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 the 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 No. SR-NYSEArca-2011-37 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 No. SR-NYSEArca-2011-37. 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
[[Page 36606]]
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 No. SR-NYSEArca-2011-37 and should be submitted on or before July
13, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-15606 Filed 6-21-11; 8:45 am]
BILLING CODE 8011-01-P
