Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Expanding the Short-Term Option Series Program, 16388-16392 [2014-06462]

Download as PDF emcdonald on DSK67QTVN1PROD with NOTICES 16388 Federal Register / Vol. 79, No. 57 / Tuesday, March 25, 2014 / Notices (d) The acquisition of Follow-On Investments as permitted by this condition will be considered a CoInvestment Transaction for all purposes and subject to the other conditions set forth in the application. 9. The Independent Directors of each Regulated Fund will be provided quarterly for review all information concerning Potential Co-Investment Transactions and Co-Investment Transactions, including investments made by other Co-Investment Affiliates that the Regulated Fund considered but declined to participate in, so that the Independent Directors may determine whether all investments made during the preceding quarter, including those investments that the Regulated Fund considered but declined to participate in, comply with the conditions of the Order. In addition, the Independent Directors will consider at least annually the continued appropriateness for the Regulated Fund of participating in new and existing Co-Investment Transactions. 10. Each Regulated Fund will maintain the records required by section 57(f)(3) of the Act as if each of the Regulated Funds were a BDC and each of the investments permitted under these conditions were approved by the Required Majority under section 57(f). 11. No Independent Director will also be a director, general partner, managing member or principal, or otherwise an ‘‘affiliated person’’ (as defined in the Act), of any of the Private Funds. 12. The expenses, if any, associated with acquiring, holding or disposing of any securities acquired in a CoInvestment Transaction (including, without limitation, the expenses of the distribution of any such securities registered for sale under the Securities Act) will, to the extent not payable by the Adviser under its respective investment advisory agreements with the Co-Investment Affiliates, be shared by the Co-Investment Affiliates in proportion to the relative amounts of the securities held or being acquired or disposed of, as the case may be. 13. Any transaction fee (including break-up or commitment fees but excluding broker’s fees contemplated by section 17(e) or 57(k), as applicable) received in connection with a CoInvestment Transaction will be distributed to the participating CoInvestment Affiliates on a pro rata basis based on the amounts they invested or committed, as the case may be, in such Co-Investment Transaction. If any transaction fee is to be held by the Adviser pending consummation of the transaction, the fee will be deposited into an account maintained by the VerDate Mar<15>2010 18:16 Mar 24, 2014 Jkt 232001 Adviser at a bank or banks having the qualifications prescribed in section 26(a)(1), and the account will earn a competitive rate of interest that will also be divided pro rata among the participating Co-Investment Affiliates based on the amounts they invest in such Co-Investment Transaction. None of the Adviser, the Co-Investment Affiliates nor any affiliated person of the Co-Investment Affiliates will receive additional compensation or remuneration of any kind as a result of or in connection with a Co-Investment Transaction (other than (a) in the case of the participating Co-Investment Affiliates, the pro rata transaction fees described above and fees or other compensation described in condition 2(c)(iii)(C), and (b) in the case of the Adviser, investment advisory fees paid in accordance with the respective agreements between the Adviser and the Co-Investment Affiliates). For the Commission, by the Division of Investment Management, under delegated authority. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–06465 Filed 3–24–14; 8:45 am] BILLING CODE 8011–01–P I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes several amendments to expand the short-term option series (‘‘STOS’’) program. 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 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71749; File No. SR– NYSEMKT–2014–20] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Expanding the ShortTerm Option Series Program March 19, 2014. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on March 13, 2014 NYSE MKT LLC (the ‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 The Exchange proposes several amendments to expand the STOS Program (the ‘‘Proposal’’) to harmonize the Exchange’s rules with recently approved changes to the rules governing short-term options series programs of other options exchanges. The proposed changes are discussed separately below in order to align them with the recently approved filings by the other exchanges. The Exchange believes that this Proposal would enable the Exchange to compete equally and fairly with other options exchanges in satisfying high market demand for weekly options and continuing strong customer demand to use STOS to execute hedging and trading strategies, particularly in the current fast and volatile investing environment. Part I of the Proposal Under Part I of the Proposal, the Exchange proposes to make two changes to the STOS Program for non-index options, including equity, currency, and exchange-traded funds (‘‘ETFs’’), as follows: (i) to allow the Exchange to list options in the STOS Program on each of the next five Fridays that are business days and are not Fridays in which monthly options series or quarterly options series expire (‘‘Short Term E:\FR\FM\25MRN1.SGM 25MRN1 Federal Register / Vol. 79, No. 57 / Tuesday, March 25, 2014 / Notices Option Expiration Dates’’) at one time; 4 and (ii) to state that additional series of STOS may be listed up to, and including on, the day of expiration.5 These proposed rule changes are substantially identical to a recently approved filing by the Chicago Board of Options (‘‘CBOE’’) and a copycat filing for immediate effectiveness by the International Securities Exchange (‘‘ISE’’), except that, unlike the CBOE and ISE filings, the Exchange does not propose to amend rules relating to its STOS Program for index options but only those rules relating to non-index options.6 Under current Rule 903(h), a ShortTerm Option Series is a series of an option class that is approved for listing and trading on the Exchange in which the series is opened for trading on any Thursday or Friday that is a business day and that expires at the close of business on the next Friday that is a business day.7 If a Thursday or Friday is not a business day, the series may be opened on the first business day immediately prior to that Thursday or Friday; and, if a Friday is not a business day, the series shall expire on the first business day immediately prior to that Friday.8 The Exchange, however, may only list STOS ‘‘on each of the next five consecutive Fridays that are business days’’ and no STOS may expire in the same week in which a monthly or quarterly option series in the same class expires.9 Thus, because a Friday expiration may coincide with an existing expiration of a monthly or quarterly series of an option in the same class as the STOS option series, the current requirement that the Fridays be consecutive may mean that the Exchange cannot open five STOS expiration dates because of existing monthly or quarterly expirations. The Exchange proposes to amend Rule 903(h) to remove the requirement that the five expiration dates be on consecutive Fridays, and instead provide that the Exchange would have the ability to list a total of five STOS expirations at the same time, provided that the expirations are on ‘‘each of the next five Fridays’’ that do not include a monthly or quarterly options expiration 4 See proposed Rule 903(h). proposed Commentary .10(c) to Rule 903(h). 6 See Securities and Exchange Act Release No. 71005 (December 6, 2013), 78 FR 75395 (December 11, 2013) (SR–CBOE–2013–096) (approval order); Securities and Exchange Act Release No. 71033 (December 11, 2013), 78 FR 76375 (December 17, 2013) (SR–ISE–2013–68). For STOS Program Rules regarding index options, see Rule 903C; Rule 900C(b)(27). 7 See Rule 903(h). 8 Id. 9 Id. emcdonald on DSK67QTVN1PROD with NOTICES 5 See VerDate Mar<15>2010 18:16 Mar 24, 2014 Jkt 232001 date.10 As proposed, the Exchange would list each of the five STOS as close to the STOS opening date as possible so that the next five STOS may be listed at one time, not including the monthly or quarterly options. For example, if a class of options has five STOS listed with expiration dates in July, the other two listed expiration dates may not be in December. The Exchange believes that allowing otherwise would undermine the purpose of the STOS Program. For example, consider a scenario in which a quarterly option expires week 1 and a monthly option expires week 4 from now. As proposed, the Exchange could list a new STOS with the following expiration: week 1 quarterly option, week 2 STOS option, week 3 STOS option, week 4 monthly option, week 5 STOS option, week 6 STOS option, and week 7 STOS option.11 As another example, if a quarterly option expires week 3 and a monthly option expires week 6, the following expirations would be allowed: Week 1 STOS option, week 2 STOS option, week 3 quarterly option, week 4 STOS option, week 5 STOS option, week 6 monthly option, week 7 STOS option. The second change that the Exchange proposes to make under Part I of the Proposal is to codify an existing practice by adding language to Commentary .10(c) to Rule 903 to state that additional STOS may be added up to, and including on, the expiration date of the series. As discussed under Part II of the Proposal below, the Exchange rules specify the number of initial and additional series that the Exchange may open for each option class that participates in the STOS Program.12 While the Exchange rules are silent on when series may be added, in practice, the Exchange, along with the other exchanges, list additional series up to, and on, the expiration day.13 Consistent with the actions taken by other options exchanges, the Exchange believes that codifying this practice will clarify authority that is not currently explicitly stated in its rules to add series up until the day of expiration.14 Given the short lifespan of STOS, the Exchange believes that the ability to list new series of options intraday is appropriate.15 10 See proposed Rule 903(h). Proposal would not allow, for example, for nothing to be listed week 7 but in week 8, a STOS option. 12 See Commentary .10(b) and (c) to Rule 903. 13 The Exchange notes that the Options Clearing Corporation (‘‘OCC’’) has the ability to accommodate series in the STOS Program intraday. 14 See supra n.6. 15 The Exchange is also proposing to add language to Commentary .10(c) stating that this provision is 11 The PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 16389 As noted above, Part I of this Proposal is consistent with the recently approved filing and current practices of other options exchanges, except that the Exchange’s Proposal is limited to amending rules relating to its STOS Program for non-index options and does not include rules relating to index options.16 The Exchange believes that this Proposal would enable the Exchange to compete equally and fairly with other options exchanges in satisfying high market demand for weekly options and continuing strong customer demand to use STOS to execute hedging and trading strategies, particularly in the current fast and volatile investing environment. Part II of the Proposal Part II of the Proposal seeks to further expand the STOS Program by making additional amendments to Commentary .10 to Rule 903. Specifically, the Exchange is proposing to: (1) Expand the number of classes on which STOS may be opened in accordance with its STOS Program from 30 to 50; (2) modify the initial listing provision to allow the Exchange to open up to 30 STOS for each expiration date in a STOS class; (3) expand the strike price range limitations for STOS; and (4) allow the Exchange to list STOSs at a strike price interval of $2.50 or greater where the strike price is above $150. These proposed changes are substantially identical to a recently approved filing by NASDAQ OMX PHLX, LLC (‘‘PHLX’’) and copycat filings for immediate effectiveness by the CBOE and ISE, unless otherwise noted herein.17 Current Commentary .10(a) to Rule 903 states that after an equity option designed to eliminate any confusion about when additional series may be added in the STOS Program in comparison to other Exchange listing programs. Specifically, the Exchange proposes to add language stating that ‘‘Notwithstanding any other provisions in this Rule 903, Short Term Option Series may be added up to and including on the Short Term Expiration Date for that option series.’’ 16 See supra n.6. 17 See Securities Exchange Act Release No. 70682 (October 15, 2013), 78 FR 62809 (October 22, 2013) (SR–PHLX–2013–101) (notice of filing); Securities Exchange Act Release No. 71004 (December 6, 2013), 78 FR 75437 (December 11, 2013) (approval order); Securities and Exchange Act Release No. 71079 (December 16, 2013), 78 FR 77188 (December 20, 2013) (SR–CBOE–2013–121); Securities and Exchange Act Release No. 71034 (December 11, 2013), 78 FR 76363 (December 17, 2013) (SR–ISE– 2013–69). Consistent with these filings, the Exchange is only proposing to amend the STOS Program for equity options, but notes that the number of classes that may participate in the STOS Program is aggregated between equity options and index options and is not apportioned between equity options and index options. Unlike the CBOE filing, however, the Exchange does not propose any conforming changes to rules relating its STOS Program for index options. E:\FR\FM\25MRN1.SGM 25MRN1 16390 Federal Register / Vol. 79, No. 57 / Tuesday, March 25, 2014 / Notices emcdonald on DSK67QTVN1PROD with NOTICES class has been approved for listing and trading on the Exchange, the Exchange may open no more than thirty option classes.18 In addition to the thirtyoption class limitation, there is also a limitation that no more than twenty initial series may be opened for trading; provided, however, that the Exchange may open up to ten additional series when the Exchange deems it necessary to maintain an orderly market, to meet customer demand or when the market price of the underlying security moves substantially from the exercise price or prices of the series already opened.19 The same number of strike prices must be opened above and below the value of the underlying security at about the time that the STOS are initially opened for trading on the Exchange.20 Furthermore, under the current rule, the strike price of each STOS currently has to be fixed with approximately the same number of strike prices being opened above and below the value of the underlying security at about the time that the STOS are initially opened for trading on the Exchange, and with strike prices being within thirty percent (30%) above or below the closing price of the underlying security from the preceding day.21 In terms of strike price intervals, the STOS Program currently allows the interval between strike prices on STOS to be (i) $0.50 or greater where the strike prices is less than $75, and $1 or greater where the strike price is between $75 and $150 for all classes that participate in the STOS Program.22 In addition, during a market move such that no series are at least 10% above or below the current price of the underlying security and all existing series have open interest, the Exchange may also open additional series in excess of the thirty-strike limitation that are between 10% and 30% of the price of the underlying security.23 Finally, in the event that the underlying security has moved such that there are no series that are at least 10% above or below the current prices of the underlying security, the Exchange will delist any series with no open interest so as to list series that are at least 10% but not more 18 See Rule 903(a). The increase in the number of option issues that could be opened pursuant to the STOS Program went into effect in August 2013. See Securities Exchange Act Release No. 34–70169 (August 13, 2013) (SR–NYSEMKT–2013–68), 78 FR 50475 (August 19, 2013). 19 See Commentary .10(a), (b) and (c) to Rule 903. 20 Id. 21 Id. 22 See Commentary .10(d) to Rule 903. 23 See Commentary .10(c) to Rule 903. VerDate Mar<15>2010 18:16 Mar 24, 2014 Jkt 232001 than 30% above or below the current price of the underlying security.24 The Exchange proposes to expand the STOS Program as the Exchange believes an expansion will benefit the marketplace while aligning the Exchange with currently proposed expansions by other options exchanges.25 First, the Exchange is proposing to increase the number of STOS classes that may be opened after an option class has been approved for listing and trading on the Exchange. The Exchange proposes to amend Commentary .10(a) to Rule 903 so that the Exchange may select up to fifty currently listed option classes on which STOS may be opened. The Exchange also proposes to amend Commentary .10(b) to Rule 903 so that the Exchange may open up to 30 series of STOS for each expiration date in that class. Second, the Exchange proposes to amend Commentary .10(b) and (c) to Rule 903 to indicate that any initial or additional strike prices listed by the Exchange shall be reasonably close to the price of the underlying equity security and within the following parameters: (i) If the price of the underlying security is less than or equal to $20, strike prices shall be not more than one hundred percent (100%) above or below the price of the underlying security; and (ii) if the price of the underlying security is greater than $20, strike prices shall be not more than fifty percent (50%) above or below the price of the underlying security.26 The Exchange is also proposing to amend Commentary .10(c) to Rule 903 to indicate that the Exchange may open additional strike prices of STOS that are no more than 50% above or below the current value of the underlying security (if the price is greater than $20); provided that demonstrated customer interest exists for such series, as expressed by institutional, corporate or individual customers or their brokers. Market-Makers trading for their own account shall not be considered when determining customer interest under this provision. The Exchange notes that this aspect of Part II of the Proposal differs from the recently amended rules of other exchanges, which permit those exchanges to open additional strike prices for STOS that are more than 50% above or below the current price of the underlying security if the price of the underlying security is greater than 24 See id. 25 See supra n.17. 26 The price of the underlying security is calculated in accordance with Rule 903A. PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 $20.00.27 However, the Exchange believes that its proposed amendment is consistent with the process for adding new series of options found in subsection 3(g)(i) of the Options Listing Procedures Plan (‘‘OLPP’’), which is codified in Rule 903A. Specifically, Rule 903A(b)(i) provides that an option series price has to be reasonably close to the price of the underlying security and must not exceed a maximum of 50% or 100%, depending on the price, from the underlying security. The rule further provides that if the price of the underlying security is greater than $20, the Exchange shall not list new option series with an exercise price more than 50% above or below the price of the underlying security. The Exchange believes that its proposed amendment to Commentary .10(c) to Rule 903 is aligned with OLPP procedures, as codified in Rule 903A(b)(i). Moreover, the Exchange believes that its proposed amendment is a reasonable enhancement to the STOS Program in that it harmonizes the Program internally by adopting consistent parameters for opening STOS and listing additional strike prices. Next, the Exchange proposes to simplify the delisting language in Commentary .10(c) to Rule 903 by removing the current range methodology that states, in part, that the Exchange will delist certain series ‘‘so as to list series that are at least 10% but not more than 30% above or below the current price of the underlying security.’’ 28 As proposed, if the underlying security has moved such that there are no series that are at least 10% above or below the current price of the underlying security, the Exchange will continue to delist any series with no open interest in both the call and the put series having a: (i) Strike higher than the highest price with open interest in the put and/or call series for a given expiration week; and (ii) strike lower than the lowest strike price with open interest in the put and/or the call series for a given expiration week. The Exchange notes that new series added after delisting will not be constrained by the prior range methodology. The Exchange believes that, like the other aspects of this Proposal, this proposed amendment will add clarity and certainty to the STOS process on the Exchange. Finally, the Exchange proposes to add $2.50 strike price intervals to the STOS 27 See PHLX Commentary .11(d) of Rule 1012; CBOE 5.5(d)(4); ISE Supplementary Material .02(d) to Rule 504. See also PHLX Commentary .10(a) of Rule 1012; CBOE Rule 5.5A; ISE Rule 504A(b)(i). 28 See Commentary .10(c) to Rule 903. E:\FR\FM\25MRN1.SGM 25MRN1 emcdonald on DSK67QTVN1PROD with NOTICES Federal Register / Vol. 79, No. 57 / Tuesday, March 25, 2014 / Notices Program. Specifically, the Exchange proposes to amend Commentary .10(d) to Rule 903 to indicate that the interval between strike prices on STOS may be $2.50 or greater where the strike price is above $150. This proposed change complements the current STOS strike price intervals of $0.50 or greater where the strike price is less than $75 (or for STOS classes that trade in one dollar strike intervals), and $1 or greater where the strike price is between $75 and $150 for all classes that participate in the STOS Program. This proposed change would align the Exchange with other options exchanges participating in the STOS Program, while permitting the listing of an additional strike interval for higher priced underlying securities that complements the current intervals.29 With regard to the impact of this Proposal on system capacity, the Exchange has analyzed its capacity and represents that it and the Options Price Reporting Authority have the necessary systems capacity to handle the potential additional traffic associated with the proposed expansion of the STOS Program. While the expansion of the STOS Program is expected to generate additional quote traffic, the Exchange believes that this increased traffic will be manageable. The Exchange also notes that any series added under this expansion would be subject to quote mitigation.30 Although the number of classes participating in the STOS Program would increase, that increase would be limited, as described above, and consistent with existing, similar programs on other exchanges.31 Further, the Exchange does not believe that the Proposal will result in a material proliferation of additional series because it is limited to a fixed number of classes. As noted above, the STOS Program has been very well-received by market participants, in particular by retail investors. There is continuing strong customer demand for having the ability to execute hedging and trading strategies via STOS, particularly in the current fast and volatile multi-faceted trading and investing environment that extends across numerous markets and platforms.32 The Exchange has been requested by traders and other market participants to expand the STOS 29 See supra n.17. Commentary .03 to Rule 6.86. 31 See supra nn.6, 17. 32 These include, without limitation, options, equities, futures, derivatives, indexes, ETFs, exchange traded notes, currencies, and over the counter instruments. 30 See VerDate Mar<15>2010 18:16 Mar 24, 2014 Jkt 232001 Program to allow additional STOS offerings and increased efficiency.33 Finally, the Exchange notes that other options exchanges have rules similar to this Proposal and other exchanges will continue to adopt similar rules, which continued expansion of the STOS Program the Exchange believes will serve to promote competition amongst the exchanges. The Exchange believes that the current Proposal will permit the Exchange to meet increased customer demand and provide market participants with the ability to hedge in a greater number of option classes and series. 2. Statutory Basis The Exchange believes that the Proposal is consistent with Section 6(b) of the Act,34 in general, and furthers the objectives of Section 6(b)(5),35 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to, and perfect the mechanism of a free and open market and, in general, to protect investors and the public interest. Additionally, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 36 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange believes that all of the elements of the Proposal, including allowing for the listing of STOS on each of the next five Fridays that are business days and are not Fridays in which monthly options series or quarterly options series expire at one time, expanding the classes and additional series that can be opened in the STOS Program, simplifying the delisting process, and allowing $2.50 strike price intervals, will result in a continuing benefit to investors by giving them more flexibility to closely tailor their investment and hedging decisions in greater number of securities, thus allowing them to better manage their risk exposure. The Exchange believes this Proposal to expand the STOS 33 In order that the Exchange not exceed the current thirty option class and twenty initial option series restriction, the Exchange has on occasion had to turn away STOS customers (traders and investors) because it could not list, or had to delist, STOS or could not open adequate STOS series because of restrictions in the STOS Program. This has negatively impacted investors and traders, particularly retail investors, who have continued to request that the Exchange add, or not remove, STOS classes, or have requested that the Exchange expand the STOS Program so that additional STOS classes and series could be opened that would allow the market participants to execute trading and hedging strategies. 34 15 U.S.C. 78f(b). 35 15 U.S.C. 78f(b)(5). 36 Id. PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 16391 Program would make the Program more effective, would harmonize the provisions with the OLPP, and would create more clarity in the Exchange’s rules to the benefit of investors, market participants and the market in general. For the foregoing reasons, the Exchange also believes that the proposed rule changes are equitable and not unfairly discriminatory as the benefits from the expansion of the STOS Program will be available to all market participants. With regard to the impact of this Proposal on system capacity, the Exchange has analyzed its capacity and represents that it and the Options Price Reporting Authority have the necessary systems capacity to handle the potential additional traffic associated with the proposed expansion of the STOS Program. While the expansion of the STOS Program is expected to generate additional quote traffic, the Exchange believes that this increased traffic will be manageable. The Exchange also notes that any series added under this expansion would be subject to quote mitigation.37 Although the number of classes participating in the STOS Program would increase, that increase would be limited, as described above, and consistent with existing, similar programs on other exchanges.38 Further, the Exchange does not believe that the Proposal will result in a material proliferation of additional series because it is limited to a fixed number of classes. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the Proposal will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. To the contrary, the Exchange believes the Proposal is procompetitive and will allow the Exchange to compete more effectively with other options exchanges that have already adopted changes to their STOS Programs that are substantially identical to the changes proposed by this filing.39 The Exchange believes that the Proposal will result in additional investment options and opportunities to achieve the investment objectives of market participants seeking efficient trading and hedging vehicles, to the benefit of investors, market participants, and the marketplace in general. 37 See Commentary .03 to Rule 6.86. supra nn.6, 17. 39 See supra nn.6, 17. 38 See E:\FR\FM\25MRN1.SGM 25MRN1 16392 Federal Register / Vol. 79, No. 57 / Tuesday, March 25, 2014 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the proposed rule change does not (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 40 and Rule 19b–4(f)(6) thereunder.41 The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange stated that waiver of this requirement will allow the Exchange to compete with other options exchanges that have expanded their STOS Programs without putting the Exchange at a competitive disadvantage. The Exchange also stated that the proposal would help eliminate investor confusion and promote competition among the options exchanges. For these reasons, the Commission believes that the proposed rule change presents no novel issues and that waiver of the 30day operative delay is consistent with the protection of investors and the public interest; and will allow the Exchange to remain competitive with other exchanges. Therefore, the Commission designates the proposed rule change to be operative upon filing.42 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 40 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). As required under Rule 19b–4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and the 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. 42 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). emcdonald on DSK67QTVN1PROD with NOTICES 41 17 VerDate Mar<15>2010 18:16 Mar 24, 2014 Jkt 232001 the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.43 Kevin M. O’Neill, Deputy Secretary. IV. Solicitation of Comments [FR Doc. 2014–06462 Filed 3–24–14; 8:45 am] BILLING CODE 8011–01–P 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–2014–20 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEMKT–2014–20. 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– NYSEMKT–2014–20 and should be submitted on or before April 15, 2014. PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71745; File No. SR–DTC– 2013–11] Self-Regulatory Organizations; Depository Trust Company; Notice of Filing Amendment Nos. 1 and 2 and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Specify Procedures Available to Issuers of Securities Deposited at DTC for Book Entry Services When DTC Imposes or Intends To Impose Restrictions on the Further Deposit and/or Book Entry Transfer of Those Securities March 19, 2014. On December 5, 2013, The Depository Trust Company (‘‘DTC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) proposed rule change SR–DTC–2013–11 (‘‘Proposed Rules’’) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder.2 The Proposed Rules were published in the Federal Register on December 24, 2013.3 The Commission received nine comments from seven commenters to the Proposed Rules and two letters from DTC responding to those comments.4 On February 10, 2014, DTC filed Amendment No. 1 to the Proposed Rules. On March 10, 2014, 43 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Release No. 34–71132 (Dec. 18, 2013); 78 FR 77755 (Dec. 24, 2013). 4 See Letters to Elizabeth M. Murphy, Secretary, Commission from: Suzanne H. Shatto dated December 20, 2013 (‘‘Shatto Letter’’); Simon Kogan dated December 22, 2013 (‘‘Kogan Letter’’); DTCC BigBake dated December 27, 2013 (‘‘DTCC BigBake Letter I’’) and March 14, 2014 (‘‘DTCC BigBake Letter II’’); Brenda Hamilton, Hamilton & Associates Law Group, PA (‘‘Hamilton Letter’’); Charles V. Rossi, Chairman, STA Board Advisory Committee, Securities Transfer Association dated January 14, 2014 (‘‘STA Letter’’); Louis A Brillemen, Louise A. Brilleman, P.C. dated January 14, 2014 (‘‘Brilleman Letter’’); Gary Emmanuel and Harvey Kesner, Sichenzia Ross Friedman Ference LLP dated January 14, 2014 (‘‘Sichenzia Letter I’’) and February 24, 2014 (‘‘Sichenzia Letter II’’); and Isaac Montal, Managing Director and Deputy General Counsel, DTCC dated February 10, 2014 (‘‘DTC Letter I’’) and March 3, 2014 (‘‘DTC Letter II’’). 1 15 E:\FR\FM\25MRN1.SGM 25MRN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 79, Number 57 (Tuesday, March 25, 2014)]
[Notices]
[Pages 16388-16392]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-06462]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71749; File No. SR-NYSEMKT-2014-20]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Expanding the Short-
Term Option Series Program

March 19, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on March 13, 2014 NYSE MKT LLC (the ``Exchange'' or ``NYSE 
MKT'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes several amendments to expand the short-term 
option series (``STOS'') program. 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 proposes several amendments to expand the STOS Program 
(the ``Proposal'') to harmonize the Exchange's rules with recently 
approved changes to the rules governing short-term options series 
programs of other options exchanges. The proposed changes are discussed 
separately below in order to align them with the recently approved 
filings by the other exchanges. The Exchange believes that this 
Proposal would enable the Exchange to compete equally and fairly with 
other options exchanges in satisfying high market demand for weekly 
options and continuing strong customer demand to use STOS to execute 
hedging and trading strategies, particularly in the current fast and 
volatile investing environment.
Part I of the Proposal
    Under Part I of the Proposal, the Exchange proposes to make two 
changes to the STOS Program for non-index options, including equity, 
currency, and exchange-traded funds (``ETFs''), as follows: (i) to 
allow the Exchange to list options in the STOS Program on each of the 
next five Fridays that are business days and are not Fridays in which 
monthly options series or quarterly options series expire (``Short Term

[[Page 16389]]

Option Expiration Dates'') at one time; \4\ and (ii) to state that 
additional series of STOS may be listed up to, and including on, the 
day of expiration.\5\ These proposed rule changes are substantially 
identical to a recently approved filing by the Chicago Board of Options 
(``CBOE'') and a copycat filing for immediate effectiveness by the 
International Securities Exchange (``ISE''), except that, unlike the 
CBOE and ISE filings, the Exchange does not propose to amend rules 
relating to its STOS Program for index options but only those rules 
relating to non-index options.\6\
---------------------------------------------------------------------------

    \4\ See proposed Rule 903(h).
    \5\ See proposed Commentary .10(c) to Rule 903(h).
    \6\ See Securities and Exchange Act Release No. 71005 (December 
6, 2013), 78 FR 75395 (December 11, 2013) (SR-CBOE-2013-096) 
(approval order); Securities and Exchange Act Release No. 71033 
(December 11, 2013), 78 FR 76375 (December 17, 2013) (SR-ISE-2013-
68). For STOS Program Rules regarding index options, see Rule 903C; 
Rule 900C(b)(27).
---------------------------------------------------------------------------

    Under current Rule 903(h), a Short-Term Option Series is a series 
of an option class that is approved for listing and trading on the 
Exchange in which the series is opened for trading on any Thursday or 
Friday that is a business day and that expires at the close of business 
on the next Friday that is a business day.\7\ If a Thursday or Friday 
is not a business day, the series may be opened on the first business 
day immediately prior to that Thursday or Friday; and, if a Friday is 
not a business day, the series shall expire on the first business day 
immediately prior to that Friday.\8\ The Exchange, however, may only 
list STOS ``on each of the next five consecutive Fridays that are 
business days'' and no STOS may expire in the same week in which a 
monthly or quarterly option series in the same class expires.\9\ Thus, 
because a Friday expiration may coincide with an existing expiration of 
a monthly or quarterly series of an option in the same class as the 
STOS option series, the current requirement that the Fridays be 
consecutive may mean that the Exchange cannot open five STOS expiration 
dates because of existing monthly or quarterly expirations.
---------------------------------------------------------------------------

    \7\ See Rule 903(h).
    \8\ Id.
    \9\ Id.
---------------------------------------------------------------------------

    The Exchange proposes to amend Rule 903(h) to remove the 
requirement that the five expiration dates be on consecutive Fridays, 
and instead provide that the Exchange would have the ability to list a 
total of five STOS expirations at the same time, provided that the 
expirations are on ``each of the next five Fridays'' that do not 
include a monthly or quarterly options expiration date.\10\ As 
proposed, the Exchange would list each of the five STOS as close to the 
STOS opening date as possible so that the next five STOS may be listed 
at one time, not including the monthly or quarterly options. For 
example, if a class of options has five STOS listed with expiration 
dates in July, the other two listed expiration dates may not be in 
December. The Exchange believes that allowing otherwise would undermine 
the purpose of the STOS Program. For example, consider a scenario in 
which a quarterly option expires week 1 and a monthly option expires 
week 4 from now. As proposed, the Exchange could list a new STOS with 
the following expiration: week 1 quarterly option, week 2 STOS option, 
week 3 STOS option, week 4 monthly option, week 5 STOS option, week 6 
STOS option, and week 7 STOS option.\11\ As another example, if a 
quarterly option expires week 3 and a monthly option expires week 6, 
the following expirations would be allowed: Week 1 STOS option, week 2 
STOS option, week 3 quarterly option, week 4 STOS option, week 5 STOS 
option, week 6 monthly option, week 7 STOS option.
---------------------------------------------------------------------------

    \10\ See proposed Rule 903(h).
    \11\ The Proposal would not allow, for example, for nothing to 
be listed week 7 but in week 8, a STOS option.
---------------------------------------------------------------------------

    The second change that the Exchange proposes to make under Part I 
of the Proposal is to codify an existing practice by adding language to 
Commentary .10(c) to Rule 903 to state that additional STOS may be 
added up to, and including on, the expiration date of the series. As 
discussed under Part II of the Proposal below, the Exchange rules 
specify the number of initial and additional series that the Exchange 
may open for each option class that participates in the STOS 
Program.\12\ While the Exchange rules are silent on when series may be 
added, in practice, the Exchange, along with the other exchanges, list 
additional series up to, and on, the expiration day.\13\ Consistent 
with the actions taken by other options exchanges, the Exchange 
believes that codifying this practice will clarify authority that is 
not currently explicitly stated in its rules to add series up until the 
day of expiration.\14\ Given the short lifespan of STOS, the Exchange 
believes that the ability to list new series of options intraday is 
appropriate.\15\
---------------------------------------------------------------------------

    \12\ See Commentary .10(b) and (c) to Rule 903.
    \13\ The Exchange notes that the Options Clearing Corporation 
(``OCC'') has the ability to accommodate series in the STOS Program 
intraday.
    \14\ See supra n.6.
    \15\ The Exchange is also proposing to add language to 
Commentary .10(c) stating that this provision is designed to 
eliminate any confusion about when additional series may be added in 
the STOS Program in comparison to other Exchange listing programs. 
Specifically, the Exchange proposes to add language stating that 
``Notwithstanding any other provisions in this Rule 903, Short Term 
Option Series may be added up to and including on the Short Term 
Expiration Date for that option series.''
---------------------------------------------------------------------------

    As noted above, Part I of this Proposal is consistent with the 
recently approved filing and current practices of other options 
exchanges, except that the Exchange's Proposal is limited to amending 
rules relating to its STOS Program for non-index options and does not 
include rules relating to index options.\16\ The Exchange believes that 
this Proposal would enable the Exchange to compete equally and fairly 
with other options exchanges in satisfying high market demand for 
weekly options and continuing strong customer demand to use STOS to 
execute hedging and trading strategies, particularly in the current 
fast and volatile investing environment.
---------------------------------------------------------------------------

    \16\ See supra n.6.
---------------------------------------------------------------------------

Part II of the Proposal
    Part II of the Proposal seeks to further expand the STOS Program by 
making additional amendments to Commentary .10 to Rule 903. 
Specifically, the Exchange is proposing to: (1) Expand the number of 
classes on which STOS may be opened in accordance with its STOS Program 
from 30 to 50; (2) modify the initial listing provision to allow the 
Exchange to open up to 30 STOS for each expiration date in a STOS 
class; (3) expand the strike price range limitations for STOS; and (4) 
allow the Exchange to list STOSs at a strike price interval of $2.50 or 
greater where the strike price is above $150. These proposed changes 
are substantially identical to a recently approved filing by NASDAQ OMX 
PHLX, LLC (``PHLX'') and copycat filings for immediate effectiveness by 
the CBOE and ISE, unless otherwise noted herein.\17\
---------------------------------------------------------------------------

    \17\ See Securities Exchange Act Release No. 70682 (October 15, 
2013), 78 FR 62809 (October 22, 2013) (SR-PHLX-2013-101) (notice of 
filing); Securities Exchange Act Release No. 71004 (December 6, 
2013), 78 FR 75437 (December 11, 2013) (approval order); Securities 
and Exchange Act Release No. 71079 (December 16, 2013), 78 FR 77188 
(December 20, 2013) (SR-CBOE-2013-121); Securities and Exchange Act 
Release No. 71034 (December 11, 2013), 78 FR 76363 (December 17, 
2013) (SR-ISE-2013-69). Consistent with these filings, the Exchange 
is only proposing to amend the STOS Program for equity options, but 
notes that the number of classes that may participate in the STOS 
Program is aggregated between equity options and index options and 
is not apportioned between equity options and index options. Unlike 
the CBOE filing, however, the Exchange does not propose any 
conforming changes to rules relating its STOS Program for index 
options.
---------------------------------------------------------------------------

    Current Commentary .10(a) to Rule 903 states that after an equity 
option

[[Page 16390]]

class has been approved for listing and trading on the Exchange, the 
Exchange may open no more than thirty option classes.\18\ In addition 
to the thirty-option class limitation, there is also a limitation that 
no more than twenty initial series may be opened for trading; provided, 
however, that the Exchange may open up to ten additional series when 
the Exchange deems it necessary to maintain an orderly market, to meet 
customer demand or when the market price of the underlying security 
moves substantially from the exercise price or prices of the series 
already opened.\19\ The same number of strike prices must be opened 
above and below the value of the underlying security at about the time 
that the STOS are initially opened for trading on the Exchange.\20\ 
Furthermore, under the current rule, the strike price of each STOS 
currently has to be fixed with approximately the same number of strike 
prices being opened above and below the value of the underlying 
security at about the time that the STOS are initially opened for 
trading on the Exchange, and with strike prices being within thirty 
percent (30%) above or below the closing price of the underlying 
security from the preceding day.\21\
---------------------------------------------------------------------------

    \18\ See Rule 903(a). The increase in the number of option 
issues that could be opened pursuant to the STOS Program went into 
effect in August 2013. See Securities Exchange Act Release No. 34-
70169 (August 13, 2013) (SR-NYSEMKT-2013-68), 78 FR 50475 (August 
19, 2013).
    \19\ See Commentary .10(a), (b) and (c) to Rule 903.
    \20\ Id.
    \21\ Id.
---------------------------------------------------------------------------

    In terms of strike price intervals, the STOS Program currently 
allows the interval between strike prices on STOS to be (i) $0.50 or 
greater where the strike prices is less than $75, and $1 or greater 
where the strike price is between $75 and $150 for all classes that 
participate in the STOS Program.\22\ In addition, during a market move 
such that no series are at least 10% above or below the current price 
of the underlying security and all existing series have open interest, 
the Exchange may also open additional series in excess of the thirty-
strike limitation that are between 10% and 30% of the price of the 
underlying security.\23\ Finally, in the event that the underlying 
security has moved such that there are no series that are at least 10% 
above or below the current prices of the underlying security, the 
Exchange will delist any series with no open interest so as to list 
series that are at least 10% but not more than 30% above or below the 
current price of the underlying security.\24\
---------------------------------------------------------------------------

    \22\ See Commentary .10(d) to Rule 903.
    \23\ See Commentary .10(c) to Rule 903.
    \24\ See id.
---------------------------------------------------------------------------

    The Exchange proposes to expand the STOS Program as the Exchange 
believes an expansion will benefit the marketplace while aligning the 
Exchange with currently proposed expansions by other options 
exchanges.\25\
---------------------------------------------------------------------------

    \25\ See supra n.17.
---------------------------------------------------------------------------

    First, the Exchange is proposing to increase the number of STOS 
classes that may be opened after an option class has been approved for 
listing and trading on the Exchange. The Exchange proposes to amend 
Commentary .10(a) to Rule 903 so that the Exchange may select up to 
fifty currently listed option classes on which STOS may be opened. The 
Exchange also proposes to amend Commentary .10(b) to Rule 903 so that 
the Exchange may open up to 30 series of STOS for each expiration date 
in that class.
    Second, the Exchange proposes to amend Commentary .10(b) and (c) to 
Rule 903 to indicate that any initial or additional strike prices 
listed by the Exchange shall be reasonably close to the price of the 
underlying equity security and within the following parameters: (i) If 
the price of the underlying security is less than or equal to $20, 
strike prices shall be not more than one hundred percent (100%) above 
or below the price of the underlying security; and (ii) if the price of 
the underlying security is greater than $20, strike prices shall be not 
more than fifty percent (50%) above or below the price of the 
underlying security.\26\
---------------------------------------------------------------------------

    \26\ The price of the underlying security is calculated in 
accordance with Rule 903A.
---------------------------------------------------------------------------

    The Exchange is also proposing to amend Commentary .10(c) to Rule 
903 to indicate that the Exchange may open additional strike prices of 
STOS that are no more than 50% above or below the current value of the 
underlying security (if the price is greater than $20); provided that 
demonstrated customer interest exists for such series, as expressed by 
institutional, corporate or individual customers or their brokers. 
Market-Makers trading for their own account shall not be considered 
when determining customer interest under this provision. The Exchange 
notes that this aspect of Part II of the Proposal differs from the 
recently amended rules of other exchanges, which permit those exchanges 
to open additional strike prices for STOS that are more than 50% above 
or below the current price of the underlying security if the price of 
the underlying security is greater than $20.00.\27\ However, the 
Exchange believes that its proposed amendment is consistent with the 
process for adding new series of options found in subsection 3(g)(i) of 
the Options Listing Procedures Plan (``OLPP''), which is codified in 
Rule 903A. Specifically, Rule 903A(b)(i) provides that an option series 
price has to be reasonably close to the price of the underlying 
security and must not exceed a maximum of 50% or 100%, depending on the 
price, from the underlying security. The rule further provides that if 
the price of the underlying security is greater than $20, the Exchange 
shall not list new option series with an exercise price more than 50% 
above or below the price of the underlying security. The Exchange 
believes that its proposed amendment to Commentary .10(c) to Rule 903 
is aligned with OLPP procedures, as codified in Rule 903A(b)(i). 
Moreover, the Exchange believes that its proposed amendment is a 
reasonable enhancement to the STOS Program in that it harmonizes the 
Program internally by adopting consistent parameters for opening STOS 
and listing additional strike prices.
---------------------------------------------------------------------------

    \27\ See PHLX Commentary .11(d) of Rule 1012; CBOE 5.5(d)(4); 
ISE Supplementary Material .02(d) to Rule 504. See also PHLX 
Commentary .10(a) of Rule 1012; CBOE Rule 5.5A; ISE Rule 504A(b)(i).
---------------------------------------------------------------------------

    Next, the Exchange proposes to simplify the delisting language in 
Commentary .10(c) to Rule 903 by removing the current range methodology 
that states, in part, that the Exchange will delist certain series ``so 
as to list series that are at least 10% but not more than 30% above or 
below the current price of the underlying security.'' \28\ As proposed, 
if the underlying security has moved such that there are no series that 
are at least 10% above or below the current price of the underlying 
security, the Exchange will continue to delist any series with no open 
interest in both the call and the put series having a: (i) Strike 
higher than the highest price with open interest in the put and/or call 
series for a given expiration week; and (ii) strike lower than the 
lowest strike price with open interest in the put and/or the call 
series for a given expiration week. The Exchange notes that new series 
added after delisting will not be constrained by the prior range 
methodology. The Exchange believes that, like the other aspects of this 
Proposal, this proposed amendment will add clarity and certainty to the 
STOS process on the Exchange.
---------------------------------------------------------------------------

    \28\ See Commentary .10(c) to Rule 903.
---------------------------------------------------------------------------

    Finally, the Exchange proposes to add $2.50 strike price intervals 
to the STOS

[[Page 16391]]

Program. Specifically, the Exchange proposes to amend Commentary .10(d) 
to Rule 903 to indicate that the interval between strike prices on STOS 
may be $2.50 or greater where the strike price is above $150. This 
proposed change complements the current STOS strike price intervals of 
$0.50 or greater where the strike price is less than $75 (or for STOS 
classes that trade in one dollar strike intervals), and $1 or greater 
where the strike price is between $75 and $150 for all classes that 
participate in the STOS Program. This proposed change would align the 
Exchange with other options exchanges participating in the STOS 
Program, while permitting the listing of an additional strike interval 
for higher priced underlying securities that complements the current 
intervals.\29\
---------------------------------------------------------------------------

    \29\ See supra n.17.
---------------------------------------------------------------------------

    With regard to the impact of this Proposal on system capacity, the 
Exchange has analyzed its capacity and represents that it and the 
Options Price Reporting Authority have the necessary systems capacity 
to handle the potential additional traffic associated with the proposed 
expansion of the STOS Program. While the expansion of the STOS Program 
is expected to generate additional quote traffic, the Exchange believes 
that this increased traffic will be manageable. The Exchange also notes 
that any series added under this expansion would be subject to quote 
mitigation.\30\ Although the number of classes participating in the 
STOS Program would increase, that increase would be limited, as 
described above, and consistent with existing, similar programs on 
other exchanges.\31\ Further, the Exchange does not believe that the 
Proposal will result in a material proliferation of additional series 
because it is limited to a fixed number of classes.
---------------------------------------------------------------------------

    \30\ See Commentary .03 to Rule 6.86.
    \31\ See supra nn.6, 17.
---------------------------------------------------------------------------

    As noted above, the STOS Program has been very well-received by 
market participants, in particular by retail investors. There is 
continuing strong customer demand for having the ability to execute 
hedging and trading strategies via STOS, particularly in the current 
fast and volatile multi-faceted trading and investing environment that 
extends across numerous markets and platforms.\32\ The Exchange has 
been requested by traders and other market participants to expand the 
STOS Program to allow additional STOS offerings and increased 
efficiency.\33\
---------------------------------------------------------------------------

    \32\ These include, without limitation, options, equities, 
futures, derivatives, indexes, ETFs, exchange traded notes, 
currencies, and over the counter instruments.
    \33\ In order that the Exchange not exceed the current thirty 
option class and twenty initial option series restriction, the 
Exchange has on occasion had to turn away STOS customers (traders 
and investors) because it could not list, or had to delist, STOS or 
could not open adequate STOS series because of restrictions in the 
STOS Program. This has negatively impacted investors and traders, 
particularly retail investors, who have continued to request that 
the Exchange add, or not remove, STOS classes, or have requested 
that the Exchange expand the STOS Program so that additional STOS 
classes and series could be opened that would allow the market 
participants to execute trading and hedging strategies.
---------------------------------------------------------------------------

    Finally, the Exchange notes that other options exchanges have rules 
similar to this Proposal and other exchanges will continue to adopt 
similar rules, which continued expansion of the STOS Program the 
Exchange believes will serve to promote competition amongst the 
exchanges. The Exchange believes that the current Proposal will permit 
the Exchange to meet increased customer demand and provide market 
participants with the ability to hedge in a greater number of option 
classes and series.
 2. Statutory Basis
    The Exchange believes that the Proposal is consistent with Section 
6(b) of the Act,\34\ in general, and furthers the objectives of Section 
6(b)(5),\35\ in particular, in that it is designed to promote just and 
equitable principles of trade, to remove impediments to, and perfect 
the mechanism of a free and open market and, in general, to protect 
investors and the public interest. Additionally, the Exchange believes 
the proposed rule change is consistent with the Section 6(b)(5) \36\ 
requirement that the rules of an exchange not be designed to permit 
unfair discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78f(b).
    \35\ 15 U.S.C. 78f(b)(5).
    \36\ Id.
---------------------------------------------------------------------------

    The Exchange believes that all of the elements of the Proposal, 
including allowing for the listing of STOS on each of the next five 
Fridays that are business days and are not Fridays in which monthly 
options series or quarterly options series expire at one time, 
expanding the classes and additional series that can be opened in the 
STOS Program, simplifying the delisting process, and allowing $2.50 
strike price intervals, will result in a continuing benefit to 
investors by giving them more flexibility to closely tailor their 
investment and hedging decisions in greater number of securities, thus 
allowing them to better manage their risk exposure. The Exchange 
believes this Proposal to expand the STOS Program would make the 
Program more effective, would harmonize the provisions with the OLPP, 
and would create more clarity in the Exchange's rules to the benefit of 
investors, market participants and the market in general. For the 
foregoing reasons, the Exchange also believes that the proposed rule 
changes are equitable and not unfairly discriminatory as the benefits 
from the expansion of the STOS Program will be available to all market 
participants.
    With regard to the impact of this Proposal on system capacity, the 
Exchange has analyzed its capacity and represents that it and the 
Options Price Reporting Authority have the necessary systems capacity 
to handle the potential additional traffic associated with the proposed 
expansion of the STOS Program. While the expansion of the STOS Program 
is expected to generate additional quote traffic, the Exchange believes 
that this increased traffic will be manageable. The Exchange also notes 
that any series added under this expansion would be subject to quote 
mitigation.\37\ Although the number of classes participating in the 
STOS Program would increase, that increase would be limited, as 
described above, and consistent with existing, similar programs on 
other exchanges.\38\ Further, the Exchange does not believe that the 
Proposal will result in a material proliferation of additional series 
because it is limited to a fixed number of classes.
---------------------------------------------------------------------------

    \37\ See Commentary .03 to Rule 6.86.
    \38\ See supra nn.6, 17.
---------------------------------------------------------------------------

 B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the Proposal will impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act. To the contrary, the Exchange believes the 
Proposal is pro-competitive and will allow the Exchange to compete more 
effectively with other options exchanges that have already adopted 
changes to their STOS Programs that are substantially identical to the 
changes proposed by this filing.\39\ The Exchange believes that the 
Proposal will result in additional investment options and opportunities 
to achieve the investment objectives of market participants seeking 
efficient trading and hedging vehicles, to the benefit of investors, 
market participants, and the marketplace in general.
---------------------------------------------------------------------------

    \39\ See supra nn.6, 17.

---------------------------------------------------------------------------

[[Page 16392]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \40\ and Rule 19b-4(f)(6) 
thereunder.\41\
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78s(b)(3)(A).
    \41\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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 asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Exchange stated that waiver of this requirement will allow 
the Exchange to compete with other options exchanges that have expanded 
their STOS Programs without putting the Exchange at a competitive 
disadvantage. The Exchange also stated that the proposal would help 
eliminate investor confusion and promote competition among the options 
exchanges. For these reasons, the Commission believes that the proposed 
rule change presents no novel issues and that waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest; and will allow the Exchange to remain competitive with 
other exchanges. Therefore, the Commission designates the proposed rule 
change to be operative upon filing.\42\
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    \42\ 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).
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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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEMKT-2014-20 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NYSEMKT-2014-20. 
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-
NYSEMKT-2014-20 and should be submitted on or before April 15, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\43\
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    \43\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-06462 Filed 3-24-14; 8:45 am]
BILLING CODE 8011-01-P

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