Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To List and Trade Option Contracts Overlying 10 Shares of Certain Securities, 16905-16908 [2013-06251]
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Federal Register / Vol. 78, No. 53 / Tuesday, March 19, 2013 / Notices
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
All submissions should refer to File
Number SR–C2–2013–012. 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
10:00 a.m. and 3:00 p.m. Copies of the
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–C2–
2013–012 and should be submitted on
or before April 9, 2013.
[Release No. 34–69131; File No. SR–
NYSEMKT–2013–23]
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BILLING CODE 8011–01–P
7 17
CFR 200.30–3(a)(12).
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
1 15
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
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.
The Exchange is proposing to list and
trade option contracts overlying 10
shares of a security (‘‘mini-options
contracts’’) and implement rule text
necessary to integrate mini-options
contracts with contracts overlying 100
shares (‘‘standard contracts’’) of the
same security. 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 initially list and trade minioptions contracts overlying five 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 was
trading at $7.65. The cost of the
standard contract overlying 100 shares
would be $765, which is [sic]
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 $76.50 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 contract and a
standard contract with a strike price of
$125 per share and a bid or offer of
$3.20 per share:
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 the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–06250 Filed 3–18–13; 8:45 am]
16905
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.
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To List and Trade Option
Contracts Overlying 10 Shares of
Certain Securities
March 13, 2013.
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 5,
2013, NYSE MKT LLC (‘‘NYSE MKT’’ or
‘‘Exchange’’) 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 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 list and
trade option contracts overlying 10
shares of a security (‘‘mini-options
contracts’’). The text of the proposed
rule change is available on the
Exchange’s Web site at www.nyse.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
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Federal Register / Vol. 78, No. 53 / Tuesday, March 19, 2013 / Notices
Standard
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Share Deliverable Upon Exercise ................................................................................................................................
Strike Price ...................................................................................................................................................................
Bid/Offer ........................................................................................................................................................................
Premium Multiplier ........................................................................................................................................................
Total Value of Deliverable .....................................................................................................................................
Total Value of Contract .........................................................................................................................................
The Exchange currently lists and
trades standardized option contracts on
a number of equities and ExchangeTraded Funds (‘‘ETFs’’) each with a unit
of trading of 100 shares. Except for the
difference in the number of deliverable
shares, the proposed mini-options
contracts would have the same terms
and contract characteristics as regularsized equity and ETF options, including
exercise style. All existing rules
applicable to options on equities and
ETFs would apply to mini-options
contracts, 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 904, position limits applicable
to a regular-sized option contract would
also apply to the mini-options contracts
on the same underlying security, with
10 mini-options contracts counting as
one regular-sized contract. Positions in
both the regular-sized option contract
and mini-options contracts on the same
security will be combined for purposes
of calculating positions.
Also, of note, the Commission has
approved an earlier proposal of the
Exchange 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 will not lead to investor
confusion. There are two important
distinctions between mini options and
standard options that are designed to
ease the likelihood of any investor
confusion. First, the premium multiplier
for the proposed mini-options contracts
will be 10, rather than 100, to reflect the
smaller unit of trading. To reflect this
5 See
Securities Exchange Act Release No. 40157
(July 1, 1998), 63 FR 37426 (July 10, 1998) (SR–
Amex–96–44).
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change, the Exchange proposes to add
Rule 959NY(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 options contract having a unit of
trading consisting of 10 shares.
Additionally, the Exchange intends to
designate mini-options contracts with
different trading symbols than those
designated for regular-sized contracts.6
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
proposing the following changes to its
rules.
The Exchange proposes to add
Commentary .01 to Rule 901 (Option
Contracts to Be Traded) to reflect that,
in addition to option contracts with a
unit of trading of 100 shares, 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 on each underlying security.
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 .15 to Rule 903 (Series of
Options Open for Trading) to list series
of mini-options provided that the
underlying security has been designated
as eligible under Rule 901, Commentary
.01. Also, the Exchange proposes to not
permit the listing of additional series of
mini-options contracts 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 strikes may be
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.
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Frm 00077
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100 shares ..
125 ..............
3.20 .............
$100 ............
$12,500 .......
$320 ............
Mini
10 shares.
125.
3.20.
$10.
$1,250.
$32.
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-options
contracts in a new expiration month.
This restriction will allow the Exchange
to list mini-options 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 .14 to Rule 904 (Position
Limits) to reflect that, for purposes of
compliance with the Position Limits of
Rules [sic] 904, ten mini-options
contracts will equal one standard
contract overlying 100 shares.
The Exchange also proposes to add
subsection (c) to Rule 959NY (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.
Mini-options with non-standard
expiration dates (e.g., weekly series,
quarterly option series and LEAPs) will
be permitted under this proposal and in
accordance with relevant Exchange
rules. The Exchange may list minioptions on SPY, AAPL, GLD, GOOG and
AMZN for all expirations applicable to
100-share options on the same
underlying.7
The Exchange’s rules that apply to the
trading of standard options would apply
to mini-options and the Exchange’s
market maker quoting obligations would
apply to mini-options.8 Intermarket
trade-through protection would apply to
mini-options; however, price protection
would not apply across standard and
mini-options on an intramarket basis.9
With regard to the impact of this
proposal on system capacity, the
Exchange has analyzed its capacity and
7 See Securities Exchange Act Release No. 67948
(September 28, 2012) 77 FR 60735 at 60737
(October 4, 2012) (Notice of Filing of Amendments
No. 1 and Order Granting Accelerated Approval of
Proposed Rule Changes as Modified by
Amendments No. 1 to List and Trade Option
Contracts Overlying 10 Shares of Certain Securities)
(SR–NYSEArca–2012–64 and SR–ISE–2012–58).
8 See 77 FR at 60738.
9 See 77 FR at 60738.
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Federal Register / Vol. 78, No. 53 / Tuesday, March 19, 2013 / Notices
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.10
2. Statutory Basis
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The Exchange believes the proposed
rule change is consistent with Section
6(b)11 of the Securities Exchange Act of
1934 (the ‘‘Act’’), in general, and
furthers the objectives of Section
6(b)(5),12 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.13 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.
10 The Exchange notes that the current schedule
of Fees will not apply to the trading of mini-options
contracts. The Exchange will not commence trading
of mini-option contracts until specific fees for minioptions contracts trading have been filed with the
Commission.
11 15 U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(5).
13 See supra note 8 [sic].
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
This proposed rule change does not
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
In this regard and as indicated below,
the Exchange notes that the rule change
is being proposed as a competitive
response to recently approved rule
amendments by other options
exchanges. The Exchange believes this
proposed rule change is necessary to
permit fair competition among the
options exchanges.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change: (1) Does not significantly affect
the protection of investors or the public
interest; (2) does not impose any
significant burden on competition; and
(3) by its terms does not become
operative for 30 days after the date of
this filing, or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest, the proposed rule
change has become effective pursuant to
Section 19(b)(3)(A) of the Act 14 and
Rule 19b–4(f)(6) thereunder.15
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative for 30 days after the
date of filing. However, Rule 19b–
4(f)(6)(iii) permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange requests that the Commission
waive the 30-day operative delay so that
it can list and trade the proposed minioptions contracts as soon as it is able.16
The Commission believes that waiving
14 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
provide the Commission with written notice of its
intent to file the proposed rule change, along with
a brief description and text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission. The
Exchange has fulfilled this requirement.
16 The Commission notes that the Exchange’s
current schedule of fees will not apply to the
trading of mini-options contracts, and the Exchange
will not commence trading of mini-options
contracts until specific fees for mini-options
contracts trading have been filed with the
Commission.
15 17
PO 00000
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Fmt 4703
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16907
the 30-day operative delay is consistent
with the protection of investors and the
public interest.17 The Commission notes
the proposal is substantively identical to
proposals that were recently approved
by the Commission, and does not raise
any new regulatory issues.18 For these
reasons, the Commission designates the
proposed rule change as operative upon
filing.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NYSEMKT–2013–23 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NYSEMKT–2013–23. 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
17 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
18 See Securities Exchange Act Release No. 67948
(September 28, 2012), 77 FR 60735 (October 4,
2012) (SR–NYSEArca–2012–64 and SR–ISE–2012–
58).
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Federal Register / Vol. 78, No. 53 / Tuesday, March 19, 2013 / Notices
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
10:00 a.m. and 3:00 p.m. Copies of the
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–
NYSEMKT–2013–23 and should be
submitted on or before April 9, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–06251 Filed 3–18–13; 8:45 am]
BILLING CODE 8011–01–P
STATES TRADE REPRESENTATIVE
Determinations Under the African
Growth and Opportunity Act
Office of the United States
Trade Representative.
ACTION: Notice.
AGENCY:
The United States Trade
Representative (USTR) has determined
that Cote d’Ivoire has adopted an
effective visa system and related
procedures to prevent unlawful
transshipment of textile and apparel
articles and the use of counterfeit
documents in connection with the
shipment of such articles and has
implemented and follows, or is making
substantial progress toward
implementing and following, the
customs procedures required by the
African Growth and Opportunity Act
(AGOA). Therefore, as specified in this
notice, imports of eligible products from
Cote d’Ivoire qualify for the textile and
apparel benefits provided for under
AGOA.
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SUMMARY:
DATES:
Effective Date: March 19, 2013.
FOR FURTHER INFORMATION CONTACT:
Constance Hamilton, Deputy Assistant
United States Trade Representative for
African Affairs, Office of the United
19 17
CFR 200.30–3(a)(12).
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17:00 Mar 18, 2013
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States Trade Representative, (202) 395–
9514.
SUPPLEMENTARY INFORMATION: The
AGOA (Title I of the Trade and
Development Act of 2000, Public Law
106–200, as amended provides
preferential tariff treatment for imports
of certain textile and apparel products
of beneficiary sub-Saharan African
countries. The textile and apparel trade
benefits under AGOA are available to
imports of eligible products from
countries that the President designates
as ‘‘beneficiary sub-Saharan African
countries,’’ provided that these
countries: (1) Have adopted an effective
visa system and related procedures to
prevent unlawful transshipment of
textile and apparel articles and the use
of counterfeit documents in connection
with shipment of such articles; and (2)
have implemented and follow, or are
making substantial progress toward
implementing and following, certain
customs procedures that assist the
Customs Service in verifying the origin
of the products. In Proclamation 8741
(October 25, 2011), the President
designated Cote d’Ivoire as a
‘‘beneficiary sub-Saharan Africa
country’’ and proclaimed that, for
purposes of section 112(c) of the AGOA,
Cote d’Ivoire shall be considered a
lesser developed beneficiary subSaharan African country.
In Proclamation 7350 (October 2,
2000), the President authorized the
USTR to perform the function of
determining whether eligible subSaharan beneficiary countries have met
the two requirements described above.
The President directed the USTR to
announce any such determinations in
the Federal Register and to implement
them through modifications the
Harmonized Tariff Schedule of the
United States (HTS). Based on actions
that Cote d’Ivoire has taken, I have
determined that Cote d’Ivoire has
satisfied these two requirements.
Accordingly, pursuant to the authority
assigned to the USTR in Proclamation
7350, U.S. note 7(a) to subchapter II of
chapter 98 of the HTS, and U.S. notes
1 and 2(d) to subchapter XIX of the HTS
are modified by inserting ‘‘Cote
d’Ivoire’’ in alphabetical sequence in the
list of countries. The foregoing
modifications to the HTS are effective
with respect to articles entered, or
withdrawn from warehouse for
consumption, on date of publication.
Importers claiming preferential tariff
treatment under the AGOA for entries of
textile and apparel articles should
ensure that those entries meet the
applicable visa requirements. See Visa
Requirements Under the African Growth
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and Opportunity Act, 66 FR 7837
(2001).
Ron Kirk,
United States Trade Representative.
[FR Doc. 2013–06274 Filed 3–18–13; 8:45 am]
BILLING CODE 3190–F3–P
OFFICE OF THE UNITED STATES
TRADE REPRESENTATIVE
2012 Generalized System of
Preferences (GSP) Product Review:
Inviting Public Comments on Possible
Actions Related to Competitive Need
Limitations
Office of the United States
Trade Representative.
ACTION: Notice and solicitation of
comments.
AGENCY:
This notice announces the
availability of full 2012 calendar year
import statistics relating to competitive
need limitations (CNLs) under the
Generalized System of Preferences
(GSP) program. The Office of the United
States Trade Representative (USTR) will
accept public comments submitted by
April 12, 2013, regarding: (1) Possible
de minimis CNL waivers; (2) possible
redesignations of articles currently not
eligible for GSP benefits because they
previously exceeded the CNL
thresholds; and (3) potential revocation
of CNL waivers.
FOR FURTHER INFORMATION CONTACT:
Tameka Cooper, GSP Program, Office of
the United States Trade Representative,
600 17th Street NW., Room 422,
Washington, DC 20508. The telephone
number is (202) 395–6971, the fax
number is (202) 395–9674, and the
email address is
Tameka_Cooper@ustr.eop.gov.
DATES: Public comments are due by 5:00
p.m., Friday, April 12, 2012.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Statutory Provisions Related to CNLs
The GSP program provides for the
duty-free importation of designated
articles when imported from designated
beneficiary developing countries
(BDCs). The GSP program is authorized
by Title V of the Trade Act of 1974 (19
U.S.C. 2461, et seq.), as amended (‘‘the
1974 Act’’).
Section 503(c)(2)(A) of the 1974 Act
sets out the two CNLs. When the
President determines that a BDC
exported to the United States during a
calendar year either: (1) A quantity of a
GSP-eligible article having a value in
excess of the applicable amount for that
year ($155 million for 2012), or (2) a
quantity of a GSP-eligible article having
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]]>Agencies
[Federal Register Volume 78, Number 53 (Tuesday, March 19, 2013)]
[Notices]
[Pages 16905-16908]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-06251]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69131; File No. SR-NYSEMKT-2013-23]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change To List and Trade
Option Contracts Overlying 10 Shares of Certain Securities
March 13, 2013.
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 5, 2013, NYSE MKT LLC (``NYSE MKT'' or ``Exchange'') 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 Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade option contracts overlying
10 shares of a security (``mini-options contracts''). The text of the
proposed rule change is available on the Exchange's Web site at
www.nyse.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 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 option contracts
overlying 10 shares of a security (``mini-options contracts'') and
implement rule text necessary to integrate mini-options contracts with
contracts overlying 100 shares (``standard contracts'') of the same
security. 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
initially list and trade mini-options contracts overlying five 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.
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\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.
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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 was trading at $7.65. The cost of
the standard contract overlying 100 shares would be $765, which is
[sic] 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 $76.50 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 contract and a standard contract
with a strike price of $125 per share and a bid or offer of $3.20 per
share:
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\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.
[[Page 16906]]
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Standard Mini
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Share Deliverable Upon Exercise 100 shares......... 10 shares.
Strike Price................... 125................ 125.
Bid/Offer...................... 3.20............... 3.20.
Premium Multiplier............. $100............... $10.
Total Value of Deliverable. $12,500............ $1,250.
Total Value of Contract.... $320............... $32.
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The Exchange currently lists and trades standardized option
contracts on a number of equities and Exchange-Traded Funds (``ETFs'')
each with a unit of trading of 100 shares. Except for the difference in
the number of deliverable shares, the proposed mini-options contracts
would have the same terms and contract characteristics as regular-sized
equity and ETF options, including exercise style. All existing rules
applicable to options on equities and ETFs would apply to mini-options
contracts, 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 904, position
limits applicable to a regular-sized option contract would also apply
to the mini-options contracts on the same underlying security, with 10
mini-options contracts counting as one regular-sized contract.
Positions in both the regular-sized option contract and mini-options
contracts on the same security will be combined for purposes of
calculating positions.
Also, of note, the Commission has approved an earlier proposal of
the Exchange 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).
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\5\ See Securities Exchange Act Release No. 40157 (July 1,
1998), 63 FR 37426 (July 10, 1998) (SR-Amex-96-44).
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The Exchange believes that the proposal to list and trade mini-
options contracts will not lead to investor confusion. There are two
important distinctions between mini options and standard options that
are designed to ease the likelihood of any investor confusion. First,
the premium multiplier for the proposed mini-options contracts will be
10, rather than 100, to reflect the smaller unit of trading. To reflect
this change, the Exchange proposes to add Rule 959NY(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 options contract having a unit of trading consisting of 10
shares. Additionally, the Exchange intends to designate mini-options
contracts with different trading symbols than those designated for
regular-sized contracts.\6\ Moreover, the Exchange believes that the
terms of mini-options contracts are consistent with the terms of the
Options Disclosure Document.
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\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.
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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 901 (Option
Contracts to Be Traded) to reflect that, in addition to option
contracts with a unit of trading of 100 shares, 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 on each
underlying security. 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 .15 to Rule 903
(Series of Options Open for Trading) to list series of mini-options
provided that the underlying security has been designated as eligible
under Rule 901, Commentary .01. Also, the Exchange proposes to not
permit the listing of additional series of mini-options contracts 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 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-options contracts in a new
expiration month. This restriction will allow the Exchange to list
mini-options 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 .14 to Rule 904
(Position Limits) to reflect that, for purposes of compliance with the
Position Limits of Rules [sic] 904, ten mini-options contracts will
equal one standard contract overlying 100 shares.
The Exchange also proposes to add subsection (c) to Rule 959NY
(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.
Mini-options with non-standard expiration dates (e.g., weekly
series, quarterly option series and LEAPs) will be permitted under this
proposal and in accordance with relevant Exchange rules. The Exchange
may list mini-options on SPY, AAPL, GLD, GOOG and AMZN for all
expirations applicable to 100-share options on the same underlying.\7\
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\7\ See Securities Exchange Act Release No. 67948 (September 28,
2012) 77 FR 60735 at 60737 (October 4, 2012) (Notice of Filing of
Amendments No. 1 and Order Granting Accelerated Approval of Proposed
Rule Changes as Modified by Amendments No. 1 to List and Trade
Option Contracts Overlying 10 Shares of Certain Securities) (SR-
NYSEArca-2012-64 and SR-ISE-2012-58).
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The Exchange's rules that apply to the trading of standard options
would apply to mini-options and the Exchange's market maker quoting
obligations would apply to mini-options.\8\ Intermarket trade-through
protection would apply to mini-options; however, price protection would
not apply across standard and mini-options on an intramarket basis.\9\
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\8\ See 77 FR at 60738.
\9\ See 77 FR at 60738.
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With regard to the impact of this proposal on system capacity, the
Exchange has analyzed its capacity and
[[Page 16907]]
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.\10\
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\10\ The Exchange notes that the current schedule of Fees will
not apply to the trading of mini-options contracts. The Exchange
will not commence trading of mini-option contracts until specific
fees for mini-options contracts trading have been filed with the
Commission.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b)\11\ of the Securities Exchange Act of 1934 (the ``Act''),
in general, and furthers the objectives of Section 6(b)(5),\12\ 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.\13\ 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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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
\13\ See supra note 8 [sic].
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B. Self-Regulatory Organization's Statement on Burden on Competition
This proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act. In this regard and as indicated below, the Exchange notes that
the rule change is being proposed as a competitive response to recently
approved rule amendments by other options exchanges. The Exchange
believes this proposed rule change is necessary to permit fair
competition among the options exchanges.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change: (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) by its terms does not become operative for 30 days after the
date of this filing, or such shorter time as the Commission may
designate if consistent with the protection of investors and the public
interest, the proposed rule change has become effective pursuant to
Section 19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6)
thereunder.\15\
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to provide the Commission
with written notice of its intent to file the proposed rule change,
along with a brief description and text of the proposed rule change,
at least five business days prior to the date of filing of the
proposed rule change, or such shorter time as designated by the
Commission. The Exchange has fulfilled this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing. However,
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest. The Exchange requests that the Commission waive
the 30-day operative delay so that it can list and trade the proposed
mini-options contracts as soon as it is able.\16\ The Commission
believes that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest.\17\ The Commission
notes the proposal is substantively identical to proposals that were
recently approved by the Commission, and does not raise any new
regulatory issues.\18\ For these reasons, the Commission designates the
proposed rule change as operative upon filing.
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\16\ The Commission notes that the Exchange's current schedule
of fees will not apply to the trading of mini-options contracts, and
the Exchange will not commence trading of mini-options contracts
until specific fees for mini-options contracts trading have been
filed with the Commission.
\17\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\18\ See Securities Exchange Act Release No. 67948 (September
28, 2012), 77 FR 60735 (October 4, 2012) (SR-NYSEArca-2012-64 and
SR-ISE-2012-58).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEMKT-2013-23 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEMKT-2013-23. 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
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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
10:00 a.m. and 3:00 p.m. Copies of the 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-NYSEMKT-2013-23 and should
be submitted on or before April 9, 2013.
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\19\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-06251 Filed 3-18-13; 8:45 am]
BILLING CODE 8011-01-P
