Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing of Proposed Rule Change To List and Trade Option Contracts Overlying 10 Shares of a Security, 24547-24549 [2012-9771]
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Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices
III. Discussion
Section 19(b)(2)(B) of the Act 5 directs
the Commission to approve a proposed
rule change of a self-regulatory
organization if it finds that such
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to such organization. Section
17A(b)(3)(F) of the Act 6 requires, among
other things, that the rules of a clearing
agency be designed to promote the
prompt and accurate clearance and
settlement of securities transactions
and, to the extent applicable, derivative
agreements, contracts, and transactions.
The proposed rule change is intended
to facilitate client-related clearing.
Because the proposed rule change will
expand the use of US Treasuries for the
initial margin requirement for clientrelated positions cleared in a clearing
participant’s customer account origin, it
will help remove certain barriers to
client-related clearing, thereby
promoting the prompt and accurate
clearance and settlement of derivative
agreements, contracts, and transactions,
and therefore is consistent with the
requirements of Section 17A(b)(3)(F) of
the Act.
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposal is
consistent with the requirements of the
Act and in particular with the
requirements of Section 17A of the Act 7
and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,8 that the
proposed rule change (File No. SR–ICC–
2012–01) be, and hereby is, approved.9
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.10
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–9769 Filed 4–23–12; 8:45 am]
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BILLING CODE 8011–01–P
5 15
U.S.C. 78s(b)(2)(B).
U.S.C. 78q–1(b)(3)(F).
7 15 U.S.C. 78q–1.
8 15 U.S.C. 78s(b)(2).
9 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition and capital formation. 15
U.S.C. 78c(f).
10 17 CFR 200.30–3(a)(12).
6 15
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66827; File No. SR–ISE–
2012–26]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing of Proposed Rule
Change To List and Trade Option
Contracts Overlying 10 Shares of a
Security
April 18, 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 April 9,
2012, International Securities Exchange,
LLC (the ‘‘Exchange’’ or the ‘‘ISE’’) filed
with the Securities and Exchange
Commission (‘‘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’’).
The text of the proposed rule change is
available on the Exchange’s Internet
Web site at https://www.ise.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization has
prepared summaries, set forth in
sections A, B and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Pursuant to ISE Rule 502, the
Exchange currently lists and trades
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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24547
standardized options contracts on a
number of equities and ExchangeTraded Fund Shares (‘‘ETFs’’), each
with a unit of trading of 100 shares. The
purpose of this proposed rule change is
to expand investors’ choices by listing
and trading option contracts on a select
number of high-priced and actively
traded securities, each with a unit of
trading ten times lower than those of the
regular sized option contracts, or 10
shares. Specifically, the Exchange
proposes to adopt Supplementary
Material .12(a) to ISE Rule 504, which
states that after an option class on a
stock or Exchange-Traded Fund Share
with a 100 share deliverable has been
approved for listing and trading on the
Exchange, series of option contracts
with a 10 share deliverable on that stock
or Exchange-Traded Fund Share may be
listed for all expirations opened for
trading on the Exchange. The Exchange
further proposes that Mini Options may
only be listed on stocks and ExchangeTraded Fund Shares that meet the
following criteria, at the time of listing:
(a) The industry average daily options
volume over the previous three calendar
months is at least 10,000 contracts, and
(b) the price of the underlying security
is at least $150.
The Exchange notes that as a result of
the proposed listing criteria, only a
handful of securities, ones that have
significant options liquidity, will be
eligible to have Mini Options listed on
them. Specifically, pursuant to the
listing criteria established by the
Exchange for Mini Options, the
following securities currently qualify to
have Mini Options listed: Apple, Inc.,
(AAPL), SPDR Gold Trust (GLD),
Google, Inc. (GOOG), Amazon, Inc.
(AMZN), International Business
Machines (IBM), and Priceline.com, Inc.
(PCLN). The Exchange believes that
Mini Options will appeal to retail
investors who may not currently be able
to participate in the trading of options
on such high priced securities.
Except for the difference in the
deliverable of shares, the proposed Mini
Options would have the same terms and
contract characteristics as regular sized
equity and ETF options, including
exercise style. All existing Exchange
rules applicable to options on equities
and ETFs would apply to Mini Options,
except with respect to position and
exercise limits and hedge exemptions to
those position limits, which would be
tailored for the smaller size. Pursuant to
proposed amendments to Rule 412,
position limits applicable to the regular
sized option contract will also apply to
the Mini Options on the same
underlying security, with 10 Mini
Option contracts counting as one regular
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sized contract. Positions in both the
regular sized option contract and Mini
Options on the same security will be
combined for purposes of calculating
positions. Further, hedge exemptions
will apply pursuant to ISE Rule 413(a),
which the Exchange proposes to revise
to provide that 10 (as opposed to 100)
shares of the underlying security in the
appropriate hedge for Mini Options and
to make clear that the hedge exemptions
apply to the position limits set forth in
Rule 412(a) and any Supplementary
Material thereto, as well as the position
limits set forth in Rule 412(d).3
The Exchange believes that the
proposal to list Mini Options will not
lead to investor confusion. There are
two important distinctions between
Mini Options and regular options that
are designed to ease the likelihood of
any investor confusion. First, the
premium multiplier for the proposed
Mini Options will be 10, rather than
100, to reflect the smaller unit of
trading. To reflect this change, the
Exchange proposes to add Rule 709(c)
which notes that bids and offers for an
option contract overlying 10 shares will
be expressed in terms of dollars per
1/10th part of the total value of the
contract. Thus, an offer of ‘‘.50’’ shall
represent an offer of $5.00 on an option
contract having a unit of trading
consisting of 10 shares. Second, the
Exchange intends to designate Mini
Options with different trading symbols
than that designated for the regular
sized contract. For example, while the
trading symbol for regular option
contracts for Apple, Inc. is AAPL, the
Exchange proposes to adopt 7AAPL as
the trading symbol for Mini Options on
that same security.
The Exchange proposes to add
Supplementary Material .12(b) to reflect
that strike prices for Mini Options shall
be set at the same level as for regular
options. For example, a call series strike
price to deliver 10 shares of stock at
$125 per share has a total deliverable
value of $1250, and the strike price will
be set at 125. Further, pursuant to
proposed new Supplementary Material
.12(c) to Rule 504, the Exchange
proposes to not permit the listing of
additional series of Mini Options if the
underlying is trading at $90 or less to
limit the number of strikes once the
underlying is no longer a high priced
3 ISE Rule 414, Exercise Limits, refers to exercise
limits that correspond to aggregate long positions as
described in ISE Rule 412. The position limit
established in a given option under ISE Rule 412
is also the exercise limit for such option. Thus,
although the proposed rule change would not
amend the text of ISE Rule 414 itself, the proposed
amendment to ISE Rule 412 would have a
corresponding effect to the exercise limits
established in ISE Rule 414.
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security. The Exchange proposes a
$90.01 minimum for continued
qualification so that additional series of
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 strikes in
Mini Options without disruption when
a new expiration month is added even
if the underlying has had a minor
decline in price.
The same trading rules applicable to
existing equity and ETF options will
apply to Mini Options. The Exchange
notes that by listing the same strike
price for Mini Options as for regular
options, the Exchange seeks to keep
intact the long-standing relationship
between the underlying security and an
option strike price thus allowing
investors to intuitively grasp the
option’s value, i.e., option is in the
money, at the money or out of the
money. The Exchange believes that by
not changing anything but the
multiplier and the option symbol, as
discussed above, retail investors will be
able to grasp the distinction between
regular size option contracts and Mini
Options. The Exchange notes that The
Options Clearing Corporation (‘‘OCC’’)
Symbology is structured for contracts
that have a deliverable of other than 100
shares to be designated with a numeric
added to the standard trading symbol.
Further, the Exchange believes that the
contract characteristics of Mini Options
are consistent with the terms of the
Options Disclosure Document.
With regard to the impact of this
proposal on system capacity, ISE 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. The
Exchange has further discussed the
proposed listing and trading of Mini
Options with the OCC, which has
represented that it is able to
accommodate the proposal.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the
Securities and Exchange Act of 1934
(‘‘Exchange Act’’),4 in general, and with
Section 6(b)(5) of the Exchange Act,5 in
4 15
5 15
PO 00000
U.S.C. 78f.
U.S.C. 78f(b)(5).
Frm 00094
Fmt 4703
Sfmt 4703
particular, in that the proposal is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to 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.
Specifically, the Exchange believes that
investors would benefit from the
introduction and availability of Mini
Options by making options on high
priced securities more readily available
and as an investing tool at more
affordable prices, particularly for
average retail investors, who otherwise
may not be able to participate in trading
options on high priced securities. As
noted above, the proposed rule change
intends to adopt a different trading
symbol to distinguish Mini Options
from regular option contracts and
therefore, ease any investor confusion as
to the product they are trading.
Moreover, the proposed rule change 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,
Mini Options 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 currently only
available to those who have positions of
100 shares or more. Further, the
proposed rule change is limited to those
securities that meet the Exchange’s
proposed listing criteria to ensure that
only those securities that have
significant options liquidity and
therefore, customer demand, are
selected to have Mini Options listed on
them.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The proposed rule change does not
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
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
members or other interested parties.
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
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Federal Register / Vol. 77, No. 79 / Tuesday, April 24, 2012 / Notices
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.
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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. In
particular, the Commission seeks
comment on the following:
1. NYSE Arca, Inc. recently proposed
to allow the listing and trading of a
‘‘mini’’ option product.6 The Exchange’s
proposal would allow the listing and
trading of Mini Options contracts with
contract specifications that differ from
the similar product proposed by NYSE
Arca. Due to the differences in contract
specifications, these two similar
products, even if on the same
underlying security, would not
necessarily be fungible. The
Commission requests comment on
whether the listing and trading of two
distinct and non-fungible ‘‘mini’’
options products, particularly if on the
same underlying security, would create
investor confusion or raise any other
issues or concerns for market
participants.
2. As discussed above, the Exchange’s
proposal would provide for contract
specifications for Mini Options that
include: (i) The strike prices would be
set at the same level for Mini Options
as for corresponding standard contracts;
(ii) the premium multiplier would be 10
for Mini Options (rather than 100 as for
the standard contract) and the premium
would be expressed in terms of dollars
per 1/10th part of the total value of the
contract; and (iii) the Exchange would
designate Mini Options with different
trading symbols than the standard
contract. The Commission requests
comment regarding the Exchange’s
proposed contract methodology.7
Comments may be submitted by any
of the following methods:
6 See Securities Exchange Act Release No. 66725
(April 3, 2012), 77 FR 21120 (April 9, 2012) (SR–
NYSEArca–2012–26).
7 For a description of the proposed contract
methodology for the mini option product proposed
by NYSE Arca, see id.
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Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
No. SR–ISE–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–ISE–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–ISE–
2012–26 and should be submitted on or
before May 15, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–9771 Filed 4–23–12; 8:45 am]
BILLING CODE 8011–01–P
8 17
PO 00000
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66830; File No. SR–
NASDAQ–2012–002]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Amendment No. 1 and Order
Granting Accelerated Approval to
Proposed Rule Change, as Modified by
Amendment No. 1, To Adopt an
Alternative to the $4 Per Share Initial
Listing Bid Price Requirement for the
Nasdaq Capital Market of Either $2
Closing Price Per Share or $3 Closing
Price Per Share, if Certain Other
Listing Requirements are Met
April 18, 2012.
I. Introduction
On January 3, 2012, The NASDAQ
Stock Market LLC (‘‘Exchange’’ or
‘‘Nasdaq’’) 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
proposal to adopt an alternative to the
$4 minimum bid price initial listing
requirement for the Nasdaq Capital
Market of either $2 or $3, if certain other
listing requirements are met. The
proposed rule change was published for
comment in the Federal Register on
January 20, 2012.3 The Commission
received one comment on the proposal.4
On March 1, 2012, the Commission
extended to April 19, 2012 the time
period in which to approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved.5 Nasdaq filed Amendment
No. 1 to the proposed rule change on
April 16, 2012.6 The Commission is
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 66159
(January 13, 2012), 77 FR 3021 (January 20, 2012)
(‘‘Notice’’).
4 See letter from David A. Donohoe, Jr., Donohoe
Advisory Associates LLC, to Elizabeth M. Murphy,
Secretary, Commission, dated February 10, 2012
(‘‘Donohoe Letter’’).
5 See Securities Exchange Act Release No. 66499
(March 1, 2012), 77 FR 13680 (March 7, 2012).
6 In Amendment No. 1, Nasdaq modified the
proposal by, among other things: (1) Changing the
alternative minimum price requirement from a bid
price to a closing price that must be maintained for
at least five consecutive business days; (2) stating
that in the event a security listed under the
alternative standard reaches a $4 closing price, in
determining whether the security qualifies for
listing under the existing Nasdaq Capital Market
listing requirement Nasdaq would review the
security to ensure that it meets both the quantitative
and qualitative listing standards and would require
that the security maintain the closing price for five
2 17
CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 77, Number 79 (Tuesday, April 24, 2012)]
[Notices]
[Pages 24547-24549]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-9771]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66827; File No. SR-ISE-2012-26]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing of Proposed Rule Change To List and Trade Option
Contracts Overlying 10 Shares of a Security
April 18, 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 April 9, 2012, International Securities Exchange, LLC (the
``Exchange'' or the ``ISE'') filed with the Securities and Exchange
Commission (``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''). The text of the proposed
rule change is available on the Exchange's Internet Web site at https://www.ise.com, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
has prepared summaries, set forth in sections A, B and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Pursuant to ISE Rule 502, the Exchange currently lists and trades
standardized options contracts on a number of equities and Exchange-
Traded Fund Shares (``ETFs''), each with a unit of trading of 100
shares. The purpose of this proposed rule change is to expand
investors' choices by listing and trading option contracts on a select
number of high-priced and actively traded securities, each with a unit
of trading ten times lower than those of the regular sized option
contracts, or 10 shares. Specifically, the Exchange proposes to adopt
Supplementary Material .12(a) to ISE Rule 504, which states that after
an option class on a stock or Exchange-Traded Fund Share with a 100
share deliverable has been approved for listing and trading on the
Exchange, series of option contracts with a 10 share deliverable on
that stock or Exchange-Traded Fund Share may be listed for all
expirations opened for trading on the Exchange. The Exchange further
proposes that Mini Options may only be listed on stocks and Exchange-
Traded Fund Shares that meet the following criteria, at the time of
listing: (a) The industry average daily options volume over the
previous three calendar months is at least 10,000 contracts, and (b)
the price of the underlying security is at least $150.
The Exchange notes that as a result of the proposed listing
criteria, only a handful of securities, ones that have significant
options liquidity, will be eligible to have Mini Options listed on
them. Specifically, pursuant to the listing criteria established by the
Exchange for Mini Options, the following securities currently qualify
to have Mini Options listed: Apple, Inc., (AAPL), SPDR Gold Trust
(GLD), Google, Inc. (GOOG), Amazon, Inc. (AMZN), International Business
Machines (IBM), and Priceline.com, Inc. (PCLN). The Exchange believes
that Mini Options will appeal to retail investors who may not currently
be able to participate in the trading of options on such high priced
securities.
Except for the difference in the deliverable of shares, the
proposed Mini Options would have the same terms and contract
characteristics as regular sized equity and ETF options, including
exercise style. All existing Exchange rules applicable to options on
equities and ETFs would apply to Mini Options, except with respect to
position and exercise limits and hedge exemptions to those position
limits, which would be tailored for the smaller size. Pursuant to
proposed amendments to Rule 412, position limits applicable to the
regular sized option contract will also apply to the Mini Options on
the same underlying security, with 10 Mini Option contracts counting as
one regular
[[Page 24548]]
sized contract. Positions in both the regular sized option contract and
Mini Options on the same security will be combined for purposes of
calculating positions. Further, hedge exemptions will apply pursuant to
ISE Rule 413(a), which the Exchange proposes to revise to provide that
10 (as opposed to 100) shares of the underlying security in the
appropriate hedge for Mini Options and to make clear that the hedge
exemptions apply to the position limits set forth in Rule 412(a) and
any Supplementary Material thereto, as well as the position limits set
forth in Rule 412(d).\3\
---------------------------------------------------------------------------
\3\ ISE Rule 414, Exercise Limits, refers to exercise limits
that correspond to aggregate long positions as described in ISE Rule
412. The position limit established in a given option under ISE Rule
412 is also the exercise limit for such option. Thus, although the
proposed rule change would not amend the text of ISE Rule 414
itself, the proposed amendment to ISE Rule 412 would have a
corresponding effect to the exercise limits established in ISE Rule
414.
---------------------------------------------------------------------------
The Exchange believes that the proposal to list Mini Options will
not lead to investor confusion. There are two important distinctions
between Mini Options and regular options that are designed to ease the
likelihood of any investor confusion. First, the premium multiplier for
the proposed Mini Options will be 10, rather than 100, to reflect the
smaller unit of trading. To reflect this change, the Exchange proposes
to add Rule 709(c) which notes that bids and offers for an option
contract overlying 10 shares will be expressed in terms of dollars per
1/10th part of the total value of the contract. Thus, an offer of
``.50'' shall represent an offer of $5.00 on an option contract having
a unit of trading consisting of 10 shares. Second, the Exchange intends
to designate Mini Options with different trading symbols than that
designated for the regular sized contract. For example, while the
trading symbol for regular option contracts for Apple, Inc. is AAPL,
the Exchange proposes to adopt 7AAPL as the trading symbol for Mini
Options on that same security.
The Exchange proposes to add Supplementary Material .12(b) to
reflect that strike prices for Mini Options shall be set at the same
level as for regular options. For example, a call series strike price
to deliver 10 shares of stock at $125 per share has a total deliverable
value of $1250, and the strike price will be set at 125. Further,
pursuant to proposed new Supplementary Material .12(c) to Rule 504, the
Exchange proposes to not permit the listing of additional series of
Mini Options 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 series of 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 strikes in Mini
Options without disruption when a new expiration month is added even if
the underlying has had a minor decline in price.
The same trading rules applicable to existing equity and ETF
options will apply to Mini Options. The Exchange notes that by listing
the same strike price for Mini Options as for regular options, the
Exchange seeks to keep intact the long-standing relationship between
the underlying security and an option strike price thus allowing
investors to intuitively grasp the option's value, i.e., option is in
the money, at the money or out of the money. The Exchange believes that
by not changing anything but the multiplier and the option symbol, as
discussed above, retail investors will be able to grasp the distinction
between regular size option contracts and Mini Options. The Exchange
notes that The Options Clearing Corporation (``OCC'') Symbology is
structured for contracts that have a deliverable of other than 100
shares to be designated with a numeric added to the standard trading
symbol. Further, the Exchange believes that the contract
characteristics of Mini Options are consistent with the terms of the
Options Disclosure Document.
With regard to the impact of this proposal on system capacity, ISE
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. The Exchange has further discussed the proposed listing
and trading of Mini Options with the OCC, which has represented that it
is able to accommodate the proposal.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Securities and Exchange Act of
1934 (``Exchange Act''),\4\ in general, and with Section 6(b)(5) of the
Exchange Act,\5\ in particular, in that the proposal is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to 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.
Specifically, the Exchange believes that investors would benefit from
the introduction and availability of Mini Options by making options on
high priced securities more readily available and as an investing tool
at more affordable prices, particularly for average retail investors,
who otherwise may not be able to participate in trading options on high
priced securities. As noted above, the proposed rule change intends to
adopt a different trading symbol to distinguish Mini Options from
regular option contracts and therefore, ease any investor confusion as
to the product they are trading. Moreover, the proposed rule change 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, Mini Options 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 currently only available
to those who have positions of 100 shares or more. Further, the
proposed rule change is limited to those securities that meet the
Exchange's proposed listing criteria to ensure that only those
securities that have significant options liquidity and therefore,
customer demand, are selected to have Mini Options listed on them.
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\4\ 15 U.S.C. 78f.
\5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not 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
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.
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
[[Page 24549]]
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. In particular, the Commission seeks
comment on the following:
1. NYSE Arca, Inc. recently proposed to allow the listing and
trading of a ``mini'' option product.\6\ The Exchange's proposal would
allow the listing and trading of Mini Options contracts with contract
specifications that differ from the similar product proposed by NYSE
Arca. Due to the differences in contract specifications, these two
similar products, even if on the same underlying security, would not
necessarily be fungible. The Commission requests comment on whether the
listing and trading of two distinct and non-fungible ``mini'' options
products, particularly if on the same underlying security, would create
investor confusion or raise any other issues or concerns for market
participants.
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\6\ See Securities Exchange Act Release No. 66725 (April 3,
2012), 77 FR 21120 (April 9, 2012) (SR-NYSEArca-2012-26).
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2. As discussed above, the Exchange's proposal would provide for
contract specifications for Mini Options that include: (i) The strike
prices would be set at the same level for Mini Options as for
corresponding standard contracts; (ii) the premium multiplier would be
10 for Mini Options (rather than 100 as for the standard contract) and
the premium would be expressed in terms of dollars per 1/10th part of
the total value of the contract; and (iii) the Exchange would designate
Mini Options with different trading symbols than the standard contract.
The Commission requests comment regarding the Exchange's proposed
contract methodology.\7\
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\7\ For a description of the proposed contract methodology for
the mini option product proposed by NYSE Arca, see id.
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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-ISE-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-ISE-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-ISE-2012-26 and should be
submitted on or before May 15, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
Kevin M. O'Neill,
Deputy Secretary.
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\8\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2012-9771 Filed 4-23-12; 8:45 am]
BILLING CODE 8011-01-P
