Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change to List and Trade Option Contracts Overlying 10 Shares of a Security (“Mini-Options Contracts”) and Implementing Rule Text Necessary to Distinguish Mini-Options Contracts From Option Contracts Overlying 100 Shares of a Security (“Standard Contracts”), 21120-21122 [2012-8428]
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<![CDATA[
21120
Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Notices
(6) A minimum of 100,000 Shares of
the Fund will be outstanding as of the
start of trading on the Exchange.
(7) With respect to application of Rule
10A–3 under the Act,24 the Fund will
rely on the exception contained in Rule
10A–3(c)(7).25
This approval order is based on all of
the Exchange’s representations.26
For the foregoing reasons, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act 27 and the rules and
regulations thereunder applicable to a
national securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,28 that the
proposed rule change (SR–NYSEArca–
2012–10) be, and it hereby is, approved.
For the Commission, by the Division
of Trading and Markets, pursuant to
delegated authority.29
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012–8425 Filed 4–6–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66725; File No. SR–
NYSEArca–2012–26]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change to List and Trade Option
Contracts Overlying 10 Shares of a
Security (‘‘Mini-Options Contracts’’)
and Implementing Rule Text Necessary
to Distinguish Mini-Options Contracts
From Option Contracts Overlying 100
Shares of a Security (‘‘Standard
Contracts’’)
April 3, 2012.
notice is hereby given that on March 23,
2012, 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade option contracts overlying 10
shares of a security (‘‘mini-options
contracts’’) and implement rule text
necessary to distinguish mini-options
contracts from option contracts
overlying 100 shares of a security
(‘‘standard contracts’’). The text of the
proposed rule change is available at the
Exchange, www.nyse.com, and the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange is proposing to list and
trade mini-options contracts and
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
implement rule text necessary to
distinguish mini-options contracts from
standard contracts. Whereas standard
contracts represent a deliverable of 100
shares of an underlying security, minioptions contracts would represent a
deliverable of 10 shares. The Exchange
proposes to list and trade mini-options
contracts overlying 5 high priced
securities for which the standard
contract overlying the same security
exhibits significant liquidity.3 The
Exchange believes that investors would
benefit from the availability of minioptions contracts by making options
overlying high priced securities more
readily available as an investing tool
and at more affordable and realistic
prices, most notably for the average
retail investor.
For example, with Apple Inc.
(‘‘AAPL’’) trading at $605.85 on March
21, 2012, ($60,585 for 100 shares
underlying a standard contract), the 605
level call expiring on March 23 is
trading at $7.65. The cost of the
standard contract overlying 100 shares
would be $765, which is substantially
higher in notional terms than the
average equity option price of $250.89.4
Proportionately equivalent mini-options
contracts on AAPL would provide
investors with the ability to manage and
hedge their portfolio risk on their
underlying investment, at a price of $76
per contract. In addition, investors who
hold a position in AAPL at less than the
round lot size would still be able to
avail themselves of options to manage
their portfolio risk. For example, the
holder of 50 shares of AAPL could write
covered calls for five mini-options
contracts. The table below demonstrates
the proposed differences between a
mini-options contracts and a standard
contract with a strike price of $125 per
share and a bid or offer of $3.20 per
share:
Standard
Share Deliverable Upon Exercise .........................................................................................................
Strike Price ............................................................................................................................................
24 17
CFR 240.10A–3.
CFR 240.10A–3(c)(7).
26 The Commission notes that it does not regulate
the market for futures in which the Fund plans to
take positions, which is the responsibility of the
CFTC. The CFTC has the authority to set limits on
the positions that any person may take in futures.
These limits may be directly set by the CFTC or by
the markets on which the futures are traded. The
Commission has no role in establishing position
limits on futures, even though such limits could
impact an exchange-traded product that is under
the jurisdiction of the Commission.
27 15 U.S.C. 78f(b)(5).
pmangrum on DSK3VPTVN1PROD with NOTICES
25 17
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28 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The Exchange proposes that mini-options
contracts would be listed in only five issues,
specifically SPDR S&P 500 (SPY), Apple, Inc.
(AAPL), SPDR Gold Trust (GLD), Google Inc.
(GOOG), and Amazon.com Inc. (AMZN). These
issues were selected because they are priced greater
than $100 and are among the most actively traded
issues, in that the standard contract exhibits average
daily volume (‘‘ADV’’) over the previous three
29 17
PO 00000
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100 shares ....................
125 ................................
Mini
10 shares
12.5
calendar months of at least 45,000 contracts,
excluding LEAPS and FLEX series. The Exchange
notes that any expansion of the program would
require that a subsequent proposed rule change be
submitted with the Commission.
4 A high priced underlying security may have
relatively expensive options, because a low
percentage move in the share price may mean a
large movement in the options in terms of absolute
dollars. Average non-FLEX equity option premium
per contract January 1–December 31, 2011. See
https://www.theocc.com/webapps/monthly-volumereports?reportClass=equity.
E:\FR\FM\09APN1.SGM
09APN1
21121
Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Notices
Standard
Bid/Offer ................................................................................................................................................
Premium Multiplier ................................................................................................................................
Total Value of Deliverable .............................................................................................................
Total Value of Contract ..................................................................................................................
pmangrum on DSK3VPTVN1PROD with NOTICES
The Exchange notes that the
Commission has approved an earlier
proposal of NYSE Arca to list and trade
option contracts overlying a number of
shares other than 100.5 Moreover, the
concept of listing and trading parallel
options products of reduced values and
sizes on the same underlying security is
not novel. For example, parallel product
pairs on a full-value and reduced-value
basis are currently listed on the S&P 500
Index (‘‘SPX’’ and ‘‘XSP,’’ respectively),
the Nasdaq 100 Index (‘‘NDX’’ and
‘‘MNX,’’ respectively) and the Russell
2000 Index (‘‘RUT’’ and ‘‘RMN,’’
respectively).
The Exchange believes that the
proposal to list and trade mini-options
contracts would not lead to investor
confusion. On the contrary, the
Exchange’s proposal is structured to
easily convey strike prices and
premiums to investors in the total
amount of the investment (100 times the
displayed premium) and the amount of
the deliverable (100 times the strike
price). The Exchange believes that the
difference between the price of the 100
share standard contract and the 10 share
mini-options contract would
immediately alert investors that the
contract is different, thereby avoiding
inadvertent investment in the wrong
contract. Additionally, the Exchange
will designate mini-options contracts
with a different trading symbols than
their related standard contract.6 The
Exchange believes that the clarity of this
approach is appropriate and
transparent, as supported by the recent
Options Clearing Corporation (‘‘OCC’’)
filing to amend its bylaws to
accommodate such strike prices and
premiums.7 Moreover, the Exchange
believes that the terms of mini-options
contracts are consistent with the terms
of the Options Disclosure Document.
The Exchange recognizes the need to
differentiate mini-options contracts
from standard options and therefore is
5 See Securities Exchange Act Release No. 44025
(February 28, 2001) 66 FR 13986 (March 8, 2001)
(approving SR–PCX–01–12).
6 OCC Symbology is structured for contracts with
other than 100 shares to be designated with a
numerical suffix to the standard trading symbol,
i.e., AAPL8.
7 See Securities Exchange Act Release No. 61485
(February 3, 2010), 75 FR 6750 (February 10, 2010)
(SR–OCC–2010–01).
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15:11 Apr 06, 2012
Jkt 226001
proposing the following changes to its
rules.
The Exchange proposes to add
Commentary .01 to Rule 6.3 (Option
Contracts to Be Traded) to reflect that,
in addition to option contracts with a
unit of trading of 100, the Exchange may
list option contracts overlying 10 shares
of SPDR S&P 500 (SPY), Apple, Inc.
(AAPL), SPDR Gold Trust (GLD), Google
Inc. (GOOG), and Amazon.com Inc.
(AMZN) for all expirations applicable to
100 share options in each class. The
Exchange believes that these five
securities are appropriate because they
are high priced securities for which
there is already significant options
liquidity and therefore significant
customer demand.
The Exchange also proposes to add
Commentary .14 to Rule 6.4 (Series of
Options Open for Trading) to list series
of mini-options provided that (i) the
underlying security has been designated
as eligible under Rule 6.3 Commentary
.01, (ii) no mini-options series will be
listed with a strike price less than $10,
and (iii) for each mini-options contract
there is a corresponding option contract
with a unit of trading of 100 overlying
the same security, and that the
underlying security is trading over $90
to list additional mini-options series.
Commentary .14 would also delineate
that strike prices for contracts overlying
10 shares shall be set at 1/100th of the
value of the contract deliverable value.
For example, an option contract to
deliver 10 shares of stock at $125 per
share has a total deliverable value of
$1,250, and the strike price would be set
at 12.50. The Exchange notes that this
is consistent with the current
determination of strike prices for
standard contracts as well as options on
the full and reduced-values of the
indexes referenced above. Additionally,
by restricting mini-options series to a
strike price of $10 or greater and to a
corresponding standard strike overlying
100 shares, the Exchange will limit the
number of series and also maintain its
application to high priced underlyings.
Also, the Exchange proposes to not
permit the listing of additional minioptions series if the underlying is
trading at $90 or less to limit the
number of strikes once the underlying is
no longer a high priced security. The
Exchange proposes a $90.01 minimum
for continued qualification so that
PO 00000
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Fmt 4703
Sfmt 4703
3.20 ...............................
100 ................................
12,500 ...........................
320 ................................
Mini
.32
100
1,250
32
additional mini-options that correspond
to standard strikes may be added even
though the underlying has fallen
slightly below the initial qualification
standard. In addition, the underlying
security must be trading above $90 for
five consecutive days before the listing
of mini-option contracts in a new
expiration month. This restriction will
allow the Exchange to list mini-option
strikes without disruption when a new
expiration month is added even if the
underlying has had a minor decline in
price.
The Exchange also proposes to add
Commentary .08 to Rule 6.8 (Position
Limits) to reflect that, for purposes of
compliance with the Position Limits of
Rules 6.8, ten mini-options contracts
will equal one standard contract
overlying 100 shares.
The Exchange also proposes to add
subsection (c) to Rule 6.71 (Meaning of
Premium Bids and Offers) to extend the
explanation of bids and offers with
respect to mini-options contracts and
also remove references to ExchangeTraded Fund Shares, because other
types of underlying securities have
options traded on them.
Finally, the Exchange proposes to add
Commentary .03 to Rule 6.72, Trading
Differentials, to allow quoting in penny
increments in mini-options contracts,
because a penny increment in a minioption is equivalent to quoting at an
increment of $0.10 per share.
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 mini-options
contracts. The Exchange has further
discussed the proposed listing and
trading of mini-options contracts with
the OCC, which has represented that it
is able to accommodate the proposal.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with Section
6(b) 8 of the Securities Exchange Act of
1934 (the ‘‘Act’’), in general, and
furthers the objectives of Section
8 15
E:\FR\FM\09APN1.SGM
U.S.C. 78f(b).
09APN1
21122
Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Notices
6(b)(5),9 in particular, because it is
designed to promote just and equitable
principles of trade, to prevent
fraudulent and manipulative acts, to
remove impediments to and to perfect
the mechanism for a free and open
market and a national market system
and, in general, to protect investors and
the public interest. Specifically, the
Exchange believes that investors would
benefit from the availability of minioptions contracts by making options on
high priced securities more readily
available as an investing tool and at
more affordable and realistic prices,
most notably for the average retail
investor. As described above, the
proposal contains a number of features
designed to protect investors by
reducing investor confusion, such as the
mini-options contracts being designated
by different trading symbols from their
related standard contracts.10 Moreover,
the proposal is designed to protect
investors and the public interest by
providing investors with an enhanced
tool to reduce risk in high priced
securities. In particular, the proposed
contracts will provide retail customers
who invest in high priced issues in lots
of less than 100 shares with a means of
protecting their investments that is
presently only available to those who
have positions of 100 shares or more.
Further, the proposal currently is
limited to five high priced securities for
which there is already significant
options liquidity, and therefore
significant customer demand and
trading volume.
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.
pmangrum on DSK3VPTVN1PROD with NOTICES
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
9 15
U.S.C. 78f(b)(5).
supra note 6.
10 See
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15:11 Apr 06, 2012
Jkt 226001
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
the proposed rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File No. SR–
NYSEArca–2012–26 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2012–26. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 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
PO 00000
Frm 00056
Fmt 4703
Sfmt 4703
should refer to File Number SR–
NYSEArca–2012–26 and should be
submitted on or before April 30, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012–8428 Filed 4–6–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66728; File No. SR–BX–
2012–023]
Self-Regulatory Organizations;
NASDAQ OMX BX, Inc.; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change To Amend the
BOX Fee Schedule
April 3, 2012.
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 March 29,
2012, NASDAQ OMX BX, Inc.
(‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
substantially 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
Fee Schedule of the Boston Options
Exchange Group, LLC (‘‘BOX’’). The text
of the proposed rule change is attached
as Exhibit 5.3 The text of the proposed
rule change is available from the
principal office of the Exchange, at the
Commission’s Public Reference Room,
on the Commission’s Web site at
www.sec.gov, and also on the
Exchange’s Internet Web site at https://
nasdaqomxbx.cchwallstreet.com/
NASDAQOMXBX/Filings/.
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
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The Commission notes that the Exhibit 5 is
attached to the filing, not to this notice.
1 15
E:\FR\FM\09APN1.SGM
09APN1
]]>Agencies
[Federal Register Volume 77, Number 68 (Monday, April 9, 2012)]
[Notices]
[Pages 21120-21122]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8428]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66725; File No. SR-NYSEArca-2012-26]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change to List and Trade Option Contracts Overlying 10
Shares of a Security (``Mini-Options Contracts'') and Implementing Rule
Text Necessary to Distinguish Mini-Options Contracts From Option
Contracts Overlying 100 Shares of a Security (``Standard Contracts'')
April 3, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on March 23, 2012, 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\ 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 list and trade option contracts overlying
10 shares of a security (``mini-options contracts'') and implement rule
text necessary to distinguish mini-options contracts from option
contracts overlying 100 shares of a security (``standard contracts'').
The text of the proposed rule change is available at the Exchange,
www.nyse.com, and the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to list and trade mini-options contracts
and implement rule text necessary to distinguish mini-options contracts
from standard contracts. Whereas standard contracts represent a
deliverable of 100 shares of an underlying security, mini-options
contracts would represent a deliverable of 10 shares. The Exchange
proposes to list and trade mini-options contracts overlying 5 high
priced securities for which the standard contract overlying the same
security exhibits significant liquidity.\3\ The Exchange believes that
investors would benefit from the availability of mini-options contracts
by making options overlying high priced securities more readily
available as an investing tool and at more affordable and realistic
prices, most notably for the average retail investor.
---------------------------------------------------------------------------
\3\ The Exchange proposes that mini-options contracts would be
listed in only five issues, specifically SPDR S&P 500 (SPY), Apple,
Inc. (AAPL), SPDR Gold Trust (GLD), Google Inc. (GOOG), and
Amazon.com Inc. (AMZN). These issues were selected because they are
priced greater than $100 and are among the most actively traded
issues, in that the standard contract exhibits average daily volume
(``ADV'') over the previous three calendar months of at least 45,000
contracts, excluding LEAPS and FLEX series. The Exchange notes that
any expansion of the program would require that a subsequent
proposed rule change be submitted with the Commission.
---------------------------------------------------------------------------
For example, with Apple Inc. (``AAPL'') trading at $605.85 on March
21, 2012, ($60,585 for 100 shares underlying a standard contract), the
605 level call expiring on March 23 is trading at $7.65. The cost of
the standard contract overlying 100 shares would be $765, which is
substantially higher in notional terms than the average equity option
price of $250.89.\4\ Proportionately equivalent mini-options contracts
on AAPL would provide investors with the ability to manage and hedge
their portfolio risk on their underlying investment, at a price of $76
per contract. In addition, investors who hold a position in AAPL at
less than the round lot size would still be able to avail themselves of
options to manage their portfolio risk. For example, the holder of 50
shares of AAPL could write covered calls for five mini-options
contracts. The table below demonstrates the proposed differences
between a mini-options contracts and a standard contract with a strike
price of $125 per share and a bid or offer of $3.20 per share:
---------------------------------------------------------------------------
\4\ A high priced underlying security may have relatively
expensive options, because a low percentage move in the share price
may mean a large movement in the options in terms of absolute
dollars. Average non-FLEX equity option premium per contract January
1-December 31, 2011. See https://www.theocc.com/webapps/monthly-volume-reports?reportClass=equity.
------------------------------------------------------------------------
Standard Mini
------------------------------------------------------------------------
Share Deliverable Upon 100 shares....... 10 shares
Exercise.
Strike Price.................. 125.............. 12.5
[[Page 21121]]
Bid/Offer..................... 3.20............. .32
Premium Multiplier............ 100.............. 100
Total Value of Deliverable 12,500........... 1,250
Total Value of Contract... 320.............. 32
------------------------------------------------------------------------
The Exchange notes that the Commission has approved an earlier
proposal of NYSE Arca to list and trade option contracts overlying a
number of shares other than 100.\5\ Moreover, the concept of listing
and trading parallel options products of reduced values and sizes on
the same underlying security is not novel. For example, parallel
product pairs on a full-value and reduced-value basis are currently
listed on the S&P 500 Index (``SPX'' and ``XSP,'' respectively), the
Nasdaq 100 Index (``NDX'' and ``MNX,'' respectively) and the Russell
2000 Index (``RUT'' and ``RMN,'' respectively).
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 44025 (February 28,
2001) 66 FR 13986 (March 8, 2001) (approving SR-PCX-01-12).
---------------------------------------------------------------------------
The Exchange believes that the proposal to list and trade mini-
options contracts would not lead to investor confusion. On the
contrary, the Exchange's proposal is structured to easily convey strike
prices and premiums to investors in the total amount of the investment
(100 times the displayed premium) and the amount of the deliverable
(100 times the strike price). The Exchange believes that the difference
between the price of the 100 share standard contract and the 10 share
mini-options contract would immediately alert investors that the
contract is different, thereby avoiding inadvertent investment in the
wrong contract. Additionally, the Exchange will designate mini-options
contracts with a different trading symbols than their related standard
contract.\6\ The Exchange believes that the clarity of this approach is
appropriate and transparent, as supported by the recent Options
Clearing Corporation (``OCC'') filing to amend its bylaws to
accommodate such strike prices and premiums.\7\ Moreover, the Exchange
believes that the terms of mini-options contracts are consistent with
the terms of the Options Disclosure Document.
---------------------------------------------------------------------------
\6\ OCC Symbology is structured for contracts with other than
100 shares to be designated with a numerical suffix to the standard
trading symbol, i.e., AAPL8.
\7\ See Securities Exchange Act Release No. 61485 (February 3,
2010), 75 FR 6750 (February 10, 2010) (SR-OCC-2010-01).
---------------------------------------------------------------------------
The Exchange recognizes the need to differentiate mini-options
contracts from standard options and therefore is proposing the
following changes to its rules.
The Exchange proposes to add Commentary .01 to Rule 6.3 (Option
Contracts to Be Traded) to reflect that, in addition to option
contracts with a unit of trading of 100, the Exchange may list option
contracts overlying 10 shares of SPDR S&P 500 (SPY), Apple, Inc.
(AAPL), SPDR Gold Trust (GLD), Google Inc. (GOOG), and Amazon.com Inc.
(AMZN) for all expirations applicable to 100 share options in each
class. The Exchange believes that these five securities are appropriate
because they are high priced securities for which there is already
significant options liquidity and therefore significant customer
demand.
The Exchange also proposes to add Commentary .14 to Rule 6.4
(Series of Options Open for Trading) to list series of mini-options
provided that (i) the underlying security has been designated as
eligible under Rule 6.3 Commentary .01, (ii) no mini-options series
will be listed with a strike price less than $10, and (iii) for each
mini-options contract there is a corresponding option contract with a
unit of trading of 100 overlying the same security, and that the
underlying security is trading over $90 to list additional mini-options
series. Commentary .14 would also delineate that strike prices for
contracts overlying 10 shares shall be set at 1/100th of the value of
the contract deliverable value. For example, an option contract to
deliver 10 shares of stock at $125 per share has a total deliverable
value of $1,250, and the strike price would be set at 12.50. The
Exchange notes that this is consistent with the current determination
of strike prices for standard contracts as well as options on the full
and reduced-values of the indexes referenced above. Additionally, by
restricting mini-options series to a strike price of $10 or greater and
to a corresponding standard strike overlying 100 shares, the Exchange
will limit the number of series and also maintain its application to
high priced underlyings. Also, the Exchange proposes to not permit the
listing of additional mini-options series if the underlying is trading
at $90 or less to limit the number of strikes once the underlying is no
longer a high priced security. The Exchange proposes a $90.01 minimum
for continued qualification so that additional mini-options that
correspond to standard strikes may be added even though the underlying
has fallen slightly below the initial qualification standard. In
addition, the underlying security must be trading above $90 for five
consecutive days before the listing of mini-option contracts in a new
expiration month. This restriction will allow the Exchange to list
mini-option strikes without disruption when a new expiration month is
added even if the underlying has had a minor decline in price.
The Exchange also proposes to add Commentary .08 to Rule 6.8
(Position Limits) to reflect that, for purposes of compliance with the
Position Limits of Rules 6.8, ten mini-options contracts will equal one
standard contract overlying 100 shares.
The Exchange also proposes to add subsection (c) to Rule 6.71
(Meaning of Premium Bids and Offers) to extend the explanation of bids
and offers with respect to mini-options contracts and also remove
references to Exchange-Traded Fund Shares, because other types of
underlying securities have options traded on them.
Finally, the Exchange proposes to add Commentary .03 to Rule 6.72,
Trading Differentials, to allow quoting in penny increments in mini-
options contracts, because a penny increment in a mini-option is
equivalent to quoting at an increment of $0.10 per share.
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 mini-options contracts. The Exchange has further
discussed the proposed listing and trading of mini-options contracts
with the OCC, which has represented that it is able to accommodate the
proposal.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) \8\ of the Securities Exchange Act of 1934 (the ``Act''),
in general, and furthers the objectives of Section
[[Page 21122]]
6(b)(5),\9\ in particular, because it is designed to promote just and
equitable principles of trade, to prevent fraudulent and manipulative
acts, to remove impediments to and to perfect the mechanism for a free
and open market and a national market system and, in general, to
protect investors and the public interest. Specifically, the Exchange
believes that investors would benefit from the availability of mini-
options contracts by making options on high priced securities more
readily available as an investing tool and at more affordable and
realistic prices, most notably for the average retail investor. As
described above, the proposal contains a number of features designed to
protect investors by reducing investor confusion, such as the mini-
options contracts being designated by different trading symbols from
their related standard contracts.\10\ Moreover, the proposal is
designed to protect investors and the public interest by providing
investors with an enhanced tool to reduce risk in high priced
securities. In particular, the proposed contracts will provide retail
customers who invest in high priced issues in lots of less than 100
shares with a means of protecting their investments that is presently
only available to those who have positions of 100 shares or more.
Further, the proposal currently is limited to five high priced
securities for which there is already significant options liquidity,
and therefore significant customer demand and trading volume.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ See supra note 6.
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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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File No. SR-NYSEArca-2012-26 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2012-26. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 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-2012-26 and should
be submitted on or before April 30, 2012.
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\11\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-8428 Filed 4-6-12; 8:45 am]
BILLING CODE 8011-01-P
