
[Federal Register: May 29, 2008 (Volume 73, Number 104)]
[Notices]               
[Page 30985-30986]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29my08-130]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57848; File No. 4-443]

 
Joint Industry Plan; Notice of Filing and Order Approving on a 
Temporary Basis Amendment No. 1 to the Plan for the Purpose of 
Developing and Implementing Procedures Designed To Facilitate the 
Listing and Trading of Standardized Options

May 22, 2008.

I. Introduction

    On May 15, 2008, May 15, 2008, May 13, 2008, May 6, 2008, May 13, 
2008, May 7, 2008, May 13, 2008, and May 8, 2008, the American Stock 
Exchange LLC (``Amex''), the Boston Stock Exchange, Inc. (``BSE''), 
Chicago Board Options Exchange, Incorporated (``CBOE''), the 
International Securities Exchange, LLC (``ISE''), The NASDAQ Stock 
Market LLC (``Nasdaq''), NYSE Arca Inc. (``NYSE Arca''), the 
Philadelphia Stock Exchange, Inc. (``Phlx''), and the Options Clearing 
Corporation (``OCC'') respectively, filed with the Securities and 
Exchange Commission (``Commission''), pursuant to Section 11A of the 
Securities Exchange Act \1\ of 1934 (``Act'') and Rule 608 
thereunder,\2\ Amendment No. 1 to the Plan for the Purpose of 
Developing and Implementing Procedures Designed to Facilitate the 
Listing and Trading of Standardized Options (``the Options Listing 
Procedures Plan'' or ``OLPP'').\3\ The amendment would provide a 
uniform time frame for the introduction of new Long-term Equity 
AnticiPation (``LEAP'' or ``LEAPS'') series on equity option classes, 
options on Exchange Traded Funds (``ETFs''), or options on Trust Issued 
Receipts (``TIRs''). This order summarily puts into effect Amendment 
No. 1 on a temporary basis not to exceed 120 days and solicits comment 
on Amendment No. 1 from interested persons.\4\
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78k-1.
    \2\ 17 CFR 242.608.
    \3\ On July 6, 2001, the Commission approved the OLPP, which was 
originally proposed by the Amex, CBOE, ISE, OCC, Phlx, and Pacific 
Exchange, Inc. (k/n/a NYSE Arca). See Securities Exchange Act 
Release No. 44521, 66 FR 36809 (July 13, 2001). On February 5, 2004, 
BSE was added as a sponsor to the OLPP. See Securities Exchange Act 
Release No. 49199, 69 FR 7030 (February 12, 2004). On March 21, 
2008, Nasdaq was added as a sponsor to the OLPP. See Securities 
Exchange Act Release No. 57546 (March 21, 2008), 73 FR 16393 (March 
27, 2008).
    \4\ A proposed amendment may be put into effect summarily upon 
publication of notice of such amendment, on a temporary basis not to 
exceed 120 days, if the Commission finds that such action is 
necessary or appropriate in the public interest, for the protection 
of investors or the maintenance of fair and orderly markets, to 
remove impediments to, and perfect mechanism of, a national market 
system or otherwise in furtherance of the purposes of the Act. See 
17 CFR 242.608(b)(4).
---------------------------------------------------------------------------

II. Description of the Proposed Amendment

    Amendment No. 1 proposes to adopt a uniform time frame for the 
introduction of new LEAP series on equity option classes, options on 
ETFs, or options on TIRs.\5\ Currently, new January LEAPS are 
introduced shortly after the groups of LEAPS with the least

[[Page 30986]]

time to expiration are converted to a conventional expiration symbol, 
generally when they have less than nine months to expiration.
---------------------------------------------------------------------------

    \5\ In Item 3, ``Implementation of Amendments,'' of their 
respective submissions, the Participants to the OLPP inadvertently 
included a sentence indicating that (in addition to Amendment No. 1) 
each Exchange would need to submit proposed rule changes for 
Commission approval to implement Amendment No. 1. The Participants 
to the OLPP have subsequently concluded that no rule changes are 
necessary for Amendment No. 1 to be implemented and submitted 
letters to correct the inadvertent reference in Item 3.
---------------------------------------------------------------------------

    By agreeing to a uniform time frame for the introduction of new 
LEAP series, the Participants to the OLPP intend to mitigate the number 
of option series available for trading during certain times of the 
year. The Participants to the OLPP intend that this will in turn lessen 
the rate of increase in quote traffic, because quotes will not be 
generated in the not-yet-available series.
    In 2007, if this proposal had been in effect, the industry would 
have eliminated one and a half billion (1,500,000,000) quotes over the 
three months of June, July, and August, out of just less than 100 
billion quotes over all, for a savings of 1.5%. The affected series, 
however, generated less than three million (3,000,000) contracts traded 
in the same period, out of more than seven hundred eighty million 
(780,000,000) contracts total industry volume, or approximately .38%. 
The exchanges agree that the benefit from reduced quoting levels 
greatly exceeds the small cost in missed business.
    Previously, in an order dated September 8, 1999, as confirmed in a 
letter from the Director of the Division of Market Regulation dated 
September 13, 2000, the Commission directed the then-current options 
exchanges to act jointly to develop strategies to address overall 
capacity concerns.
    The amendment also grants authority to the Participants to the OLPP 
to coordinate the date of introduction of new LEAP classes, so as to 
provide the least disruption on the options industry by having the 
flexibility to avoid holidays, expiration periods, and industry wide 
tests which are scheduled from time to time.

III. Discussion

    After careful consideration, the Commission finds that the proposed 
amendment to the OLPP is consistent with the requirements of the Act 
and the rules and regulations thereunder.\6\ In particular, the 
Commission finds that the proposed amendment is consistent with the 
provisions of Section 11A of the Act \7\ and Rule 608 of Regulation NMS 
thereunder,\8\ in that it is appropriate in the public interest, for 
the protection of investors and the maintenance of fair and orderly 
markets. Specifically, the Commission believes that by adopting a 
uniform time frame for the introduction of new LEAP series on equity 
option classes, options on ETFs, and options on TIRs, the options 
exchanges will reduce the number of option series available for trading 
during certain times of the year, and thus may reduce increases in the 
options quote rate because market participants will not be submitting 
quotes in the not-yet-available LEAP series. In addition, the 
Commission finds that it is appropriate to put Amendment No. 1 into 
effect summarily upon publication of this notice on a temporary basis. 
The Commission believes that such action is appropriate in the public 
interest, for the protection of investors, and the maintenance of fair 
and orderly markets because it will allow the options exchanges to 
implement the initiative to reduce quote message traffic beginning 
immediately.\9\
---------------------------------------------------------------------------

    \6\ In approving this amendment, the Commission has considered 
its impact on efficiency, competition, and capital formation. See 
U.S.C. 78c(f).
    \7\ 15 U.S.C. 78k-1.
    \8\ 17 CFR 242.608(b)(4).
    \9\ The Commission notes that the options exchanges need not 
submit proposed rule changes for Commission approval in order to 
implement this initiative to mitigate quote traffic. See supra note 
5.
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether proposed 
Amendment No. 1 is consistent with the Act. Comments may be submitted 
by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Numbers 4-443 in the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Numbers 4-443. These file numbers 
should be included on the subject line if e-mail 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 (http://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 inspection and copying in the 
Commission's Public Reference Section, 100 F Street, NE., Washington, 
DC 20549-1090 on business days between the hours of 10 a.m. and 3 p.m. 
Copies of such filing also will be available for inspection and copying 
at the principal office of the Exchanges. 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 4-443 and should be submitted on or before 
June 19, 2008.

V. Conclusion

    It is therefore ordered, pursuant to Section 11A of the Act,\10\ 
and Rule 608 thereunder \11\ that proposed Amendment No. 1 be, and it 
hereby is, approved on a temporary basis until September 19, 2008.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78k-1.
    \11\ 17 CFR 242.608(b)(4).

For the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(29).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
[FR Doc. E8-11930 Filed 5-28-08; 8:45 am]

BILLING CODE 8010-01-P
