Self-Regulatory Organizations; International Securities Exchange, LLC; Order Granting Approval of Proposed Rule Change, as Modified by Amendment No. 1, Regarding Strike Price Intervals for Certain Option Classes, 54629-54630 [2012-21767]
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54629
Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Notices
margin requirement on the put spread
and $500 margin requirement on the
call spread. However, there are
offsetting properties between the two
spreads, and, if viewed collectively, a
total margin requirement of $1,500 is
not necessary. Using the proposed
computational methodology, a margin
requirement would be calculated as
follows:
INTRINSIC VALUES FOR ASSUMED PRICES OF THE UNDERLYING SPREAD
$50
Long 1 XYZ May2011 50 put ..........................................................................................
Short 1 XYZ May2011 60 put ..........................................................................................
Short 1 XYZ May2011 65 call .........................................................................................
Long 1 XYZ May2011 70 call ..........................................................................................
Net intrinsic values ..........................................................................................................
The greatest loss from among the
netted intrinsic values is $1,000.20
Under the proposed rule amendments,
this would be the margin requirement.
This spread margin requirement is $500
less than that required under current
Exchange margin rules. Note that under
both the current and proposed rules,
any net debit incurred when
establishing the spread is required to be
paid for in full.
It can be intuitively shown that the
put spread and call spread in the
example do not have $1,500 of risk
when viewed collectively. If the price of
the underlying security or instrument is
at or above $60, the put spread would
have no intrinsic value. At or below
$65, the call spread would have no
intrinsic value. Thus, both spreads
would never be at risk at any given price
of the underlying security or
instrument. Therefore, margin need be
required on only one of the spreads—
the one with the highest risk. In this
example, the put spread has the highest
risk ($1,000), and that is the risk (and
margin requirement) that would be
rendered by the proposed
computational methodology.
In summary, the proposed rule
amendments would enable the
Exchange, for margin purposes, to
accommodate the many types of spread
strategies utilized in the industry today
in a fair and efficient manner.
tkelley on DSK3SPTVN1PROD with NOTICES
III. Discussion and Commission’s
Findings
After careful review of the proposed
rule change, the Commission finds that
the proposed rule change is consistent
with the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
exchange.21 In particular, the
$60
0
$(1,000)
0
0
$(1,000)
Commission finds that the proposal is
consistent with Section 6(b)(5) of the
Act,22 which requires, among other
things, that the rules of an exchange be
designed to promote just and equitable
principles of trade, remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, protect investors and the public
interest. More specifically, the
Commission believes that the proposed
rule change modernizes the treatment of
option spread strategies while
maintaining margin requirements that
are commensurate with the risk of those
strategies. Further, because it is
consistent with changes being made to
FINRA Rule 4210,23 the proposed rule
change will provide for a more uniform
application of margin requirements for
similar products.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,24 that the
proposed rule change (SR–CBOE–2012–
043) is approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–21765 Filed 9–4–12; 8:45 am]
BILLING CODE 8011–01–P
$65
0
0
0
0
0
$70
0
0
0
0
0
0
0
$(500)
0
$(500)
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67754; File No. SR–ISE–
2012–33]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Order Granting Approval of
Proposed Rule Change, as Modified by
Amendment No. 1, Regarding Strike
Price Intervals for Certain Option
Classes
August 29, 2012.
I. Introduction
On May 21, 2012, the International
Securities Exchange, LLC (‘‘ISE’’ 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
modify its Short Term Option Series
Program (‘‘STOS Program’’) to permit,
during the expiration week of an option
class that is selected for the STOS
Program (‘‘STOS Option’’), the strike
price intervals for the related non-STOS
option that is in the same class as a
STOS Option (‘‘Related non-STOS
Option’’) to be the same as the strike
price interval for the STOS Option. The
Exchange also proposed to adopt a rule
to open for trading Short Term Option
Series at $0.50 strike price intervals for
option classes that trade in one dollar
increments and are in the STOS
Program (‘‘Eligible Option Classes’’).
The proposed rule change was
published for comment in the Federal
Register on June 6, 2012.3 The
Commission received one comment
letter on the proposal.4 On July 26,
1 15
20 Again,
depending on the type of spread
strategy, there may be no loss among the netted
intrinsic values, in which case there would be no
margin requirement.
21 In approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
VerDate Mar<15>2010
19:14 Sep 04, 2012
Jkt 226001
22 15
U.S.C. 78f(b)(5).
23 See Securities Exchange Act Release No. 67751
(Aug. 29, 2012) (SR–FINRA–2012–024) (order
approving changes to FINRA Rule 4210 relating to
spread margin requirements).
24 15 U.S.C. 78s(b)(2).
25 17 CFR 200.30–3(a)(12).
PO 00000
Frm 00076
Fmt 4703
Sfmt 4703
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 67083
(June 6, 2012), 76 FR 33543 (‘‘Notice’’).
4 See letter from Jenny L. Klebes, Senior Attorney,
Legal Division, Chicago Board Options Exchange,
Incorporated (‘‘CBOE’’), to Elizabeth M. Murphy,
Secretary, Commission, dated June 27, 2012
2 17
E:\FR\FM\05SEN1.SGM
Continued
05SEN1
54630
Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / Notices
2012, ISE filed Amendment No.1 to the
proposed rule change.5 This order
approves the proposed rule change, as
modified by Amendment No. 1.
tkelley on DSK3SPTVN1PROD with NOTICES
II. Description of the Proposal
The Exchange proposed to amend ISE
Rules 504 (Series of Options Contracts
Open for Trading) and 2009 (Terms of
Index Options Contracts) to indicate
that, during the expiration week, the
strike price intervals for the Related
non-STOS Option shall be the same as
the strike price interval for the STOS
Option. The Exchange also proposed to
adopt a rule that would permit ISE to
list Short Term Option Series at $0.50
strike price intervals for Eligible Option
Classes.
In the Notice, the Exchange stated that
the principal reason for the proposed
expansion is in response to market and
customer demand to list actively traded
products in more granular strike price
intervals and to provide Exchange
members and their customers increased
trading opportunities in the STOS
Program.6 ISE also represented that
there are substantial benefits to market
participants in the ability to trade the
Eligible Option Classes at more granular
strike price intervals and that the instant
proposal has the support of several of its
market makers and was developed in
consultations with one such marketmaking firm.7 Furthermore, the
Exchange also argued that allowing it to
open Related non-STOS Options at the
more granular strike price intervals the
week before expiration would ensure
conformity between STOS options and
Related non-STOS Options.
The Exchange stated that it has
analyzed its capacity, and represented
that it and the Options Price Reporting
Authority (‘‘OPRA’’) have the necessary
systems capacity to handle the potential
additional traffic associated with trading
the Eligible Option Classes in narrower
strike price intervals.8 The Exchange
(‘‘CBOE Letter’’). CBOE sought further clarification
on how the proposed rule change would be
implemented and suggested that the proposed rule
change be revised to indicate which, if any, day(s)
during the week of expiration for standard options
the related non-STOS options could be added. See
CBOE Letter at 2.
5 Amendment No. 1 clarified the timing of when
additional series of non-STOS, or standard options,
may be opened. Because Amendment No. 1 is
technical in nature, the Commission is not required
to publish it for public comment.
6 See Notice, supra note 3 at 33544.
7 Id. at 33545.
8 Id. The Exchange also stated that, while
liquidity levels at each individual option series
could decrease as a result of listing short term
options series at more granular strike price
intervals, it did not expect that the proposed rule
change would result in a significant change in
liquidity or otherwise cause liquidity in the Eligible
Options Classes products to decline.
VerDate Mar<15>2010
19:14 Sep 04, 2012
Jkt 226001
also represented that the proposal, if
approved, would not increase the
number of listed short-term series.9
III. Discussion and Commission
Findings
After careful review of the proposed
rule change and the CBOE Letter, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.10
Specifically, the Commission finds that
the proposal is consistent with Section
6(b)(5) of the Act,11 which requires,
among other things, that the rules of a
national securities exchange be
designed to promote just and equitable
principles of trade, to prevent
fraudulent and manipulative acts, 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. The Commission
believes that the proposal strikes a
reasonable balance between the
Exchange’s desire to offer a wider array
of investment opportunities and the
need to avoid unnecessary proliferation
of options series.
In approving this proposal, the
Commission notes that the Exchange
has represented that it and OPRA have
the necessary systems capacity to
handle the potential additional traffic
associated with trading the expanded
number of strike price intervals
available to the Eligible Option Classes
and Related non-STO Options. The
Commission expects the Exchange to
monitor the trading volume associated
with the additional options series listed
as a result of this proposal and the effect
of these additional series on market
fragmentation and on the capacity of the
Exchange’s, OPRA’s, and vendors’
automated systems.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,12 that the
proposed rule change (SR–ISE–2012–33)
be, and it hereby is, approved.
9 See
Notice, supra note 3 at 33545
approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
11 15 U.S.C. 78f(b)(5).
12 15 U.S.C. 78s(b)(2).
10 In
PO 00000
Frm 00077
Fmt 4703
Sfmt 4703
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–21767 Filed 9–4–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67755; File No. SR–BYX–
2012–012]
Self-Regulatory Organizations; BATS–
Y Exchange, Inc.; Order Approving
Proposed Rule Change, as Modified by
Amendment No. 1, To Adopt a New
Market Maker Peg Order Available to
Exchange Market Makers
August 29, 2012.
I. Introduction
On June 26, 2012, BATS–Y Exchange,
Inc. (‘‘Exchange’’ or ‘‘BYX’’) 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 adopt a new Market Maker
Peg Order to provide similar
functionality as the automated
functionality provided to market makers
under Rule 11.8(e). The proposed rule
change was published for comment in
the Federal Register on July 16, 2012.3
The Commission received no comment
letters regarding the proposed rule
change. This order approves the
proposed rule change, as modified by
Amendment No. 1.
II. Background
BYX is proposing to adopt a new
Market Maker Peg Order to provide a
similar functionality presently available
to Exchange market makers under Rule
11.8(e). 4 BYX adopted Rule 11.8(e) as
13 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. 67382
(July 10, 2012), 77 FR 41842 (‘‘Notice’’). The
Commission notes that on July 6, 2012, the
Exchange submitted Amendment No. 1 to the
proposed rule change to make certain amendments
that, in part, clarified that it is expected that market
makers will perform the necessary checks to
comply with Regulation SHO prior to entry of a
Market Maker Peg Order.
4 BYX will continue to offer the present
automated quote management functionality
provided to market makers under Rule 11.8(e) for
a period of 3 months after the implementation of
the proposed Market Maker Peg Order. The purpose
of this transition period, during which both the
present automated quote management functionality
under Rule 11.8(e) and the Market Maker Peg Order
will operate concurrently, is to afford market
makers with the opportunity to adequately test the
1 15
E:\FR\FM\05SEN1.SGM
05SEN1
]]>Agencies
[Federal Register Volume 77, Number 172 (Wednesday, September 5, 2012)]
[Notices]
[Pages 54629-54630]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-21767]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67754; File No. SR-ISE-2012-33]
Self-Regulatory Organizations; International Securities
Exchange, LLC; Order Granting Approval of Proposed Rule Change, as
Modified by Amendment No. 1, Regarding Strike Price Intervals for
Certain Option Classes
August 29, 2012.
I. Introduction
On May 21, 2012, the International Securities Exchange, LLC
(``ISE'' 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 modify its Short Term Option
Series Program (``STOS Program'') to permit, during the expiration week
of an option class that is selected for the STOS Program (``STOS
Option''), the strike price intervals for the related non-STOS option
that is in the same class as a STOS Option (``Related non-STOS
Option'') to be the same as the strike price interval for the STOS
Option. The Exchange also proposed to adopt a rule to open for trading
Short Term Option Series at $0.50 strike price intervals for option
classes that trade in one dollar increments and are in the STOS Program
(``Eligible Option Classes''). The proposed rule change was published
for comment in the Federal Register on June 6, 2012.\3\ The Commission
received one comment letter on the proposal.\4\ On July 26,
[[Page 54630]]
2012, ISE filed Amendment No.1 to the proposed rule change.\5\ This
order approves the proposed rule change, as modified by Amendment No.
1.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 67083 (June 6, 2012), 76
FR 33543 (``Notice'').
\4\ See letter from Jenny L. Klebes, Senior Attorney, Legal
Division, Chicago Board Options Exchange, Incorporated (``CBOE''),
to Elizabeth M. Murphy, Secretary, Commission, dated June 27, 2012
(``CBOE Letter''). CBOE sought further clarification on how the
proposed rule change would be implemented and suggested that the
proposed rule change be revised to indicate which, if any, day(s)
during the week of expiration for standard options the related non-
STOS options could be added. See CBOE Letter at 2.
\5\ Amendment No. 1 clarified the timing of when additional
series of non-STOS, or standard options, may be opened. Because
Amendment No. 1 is technical in nature, the Commission is not
required to publish it for public comment.
---------------------------------------------------------------------------
II. Description of the Proposal
The Exchange proposed to amend ISE Rules 504 (Series of Options
Contracts Open for Trading) and 2009 (Terms of Index Options Contracts)
to indicate that, during the expiration week, the strike price
intervals for the Related non-STOS Option shall be the same as the
strike price interval for the STOS Option. The Exchange also proposed
to adopt a rule that would permit ISE to list Short Term Option Series
at $0.50 strike price intervals for Eligible Option Classes.
In the Notice, the Exchange stated that the principal reason for
the proposed expansion is in response to market and customer demand to
list actively traded products in more granular strike price intervals
and to provide Exchange members and their customers increased trading
opportunities in the STOS Program.\6\ ISE also represented that there
are substantial benefits to market participants in the ability to trade
the Eligible Option Classes at more granular strike price intervals and
that the instant proposal has the support of several of its market
makers and was developed in consultations with one such market-making
firm.\7\ Furthermore, the Exchange also argued that allowing it to open
Related non-STOS Options at the more granular strike price intervals
the week before expiration would ensure conformity between STOS options
and Related non-STOS Options.
---------------------------------------------------------------------------
\6\ See Notice, supra note 3 at 33544.
\7\ Id. at 33545.
---------------------------------------------------------------------------
The Exchange stated that it has analyzed its capacity, and
represented that it and the Options Price Reporting Authority
(``OPRA'') have the necessary systems capacity to handle the potential
additional traffic associated with trading the Eligible Option Classes
in narrower strike price intervals.\8\ The Exchange also represented
that the proposal, if approved, would not increase the number of listed
short-term series.\9\
---------------------------------------------------------------------------
\8\ Id. The Exchange also stated that, while liquidity levels at
each individual option series could decrease as a result of listing
short term options series at more granular strike price intervals,
it did not expect that the proposed rule change would result in a
significant change in liquidity or otherwise cause liquidity in the
Eligible Options Classes products to decline.
\9\ See Notice, supra note 3 at 33545
---------------------------------------------------------------------------
III. Discussion and Commission Findings
After careful review of the proposed rule change and the CBOE
Letter, the Commission finds that the proposed rule change is
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\10\ Specifically, the Commission finds that the proposal is
consistent with Section 6(b)(5) of the Act,\11\ which requires, among
other things, that the rules of a national securities exchange be
designed to promote just and equitable principles of trade, to prevent
fraudulent and manipulative acts, 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. The
Commission believes that the proposal strikes a reasonable balance
between the Exchange's desire to offer a wider array of investment
opportunities and the need to avoid unnecessary proliferation of
options series.
---------------------------------------------------------------------------
\10\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In approving this proposal, the Commission notes that the Exchange
has represented that it and OPRA have the necessary systems capacity to
handle the potential additional traffic associated with trading the
expanded number of strike price intervals available to the Eligible
Option Classes and Related non-STO Options. The Commission expects the
Exchange to monitor the trading volume associated with the additional
options series listed as a result of this proposal and the effect of
these additional series on market fragmentation and on the capacity of
the Exchange's, OPRA's, and vendors' automated systems.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\12\ that the proposed rule change (SR-ISE-2012-33) be, and it
hereby is, approved.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-21767 Filed 9-4-12; 8:45 am]
BILLING CODE 8011-01-P
