
[Federal Register Volume 76, Number 90 (Tuesday, May 10, 2011)]
[Notices]
[Pages 27136-27137]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-11318]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64404; File No. SR-NYSEAmex-2011-31]


Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Proposing To Extend 
Its Program That Allows Transactions To Take Place at a Price That Is 
Below $1 per Option Contract Until June 1, 2012

May 4, 2011.
    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 May 2, 2011, NYSE Amex LLC (the ``Exchange'' or ``NYSE 
Amex'') 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 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\ 15 U.S.C. 78a.
    \3\ 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 extend its program that allows 
transactions to take place at a price that is below $1 per option 
contract until June 1, 2012. The text of the proposed rule change is 
available at the Exchange, at http://www.nyse.com, at the Commission's 
Public Reference Room, and on the Commission's Web site at http://www.sec.gov.

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 Exchange 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 purpose of this filing is to extend the Pilot Program \4\ under 
Rule 968NY to allow accommodation transactions ``Cabinet Trades'') to 
take place at a price that is below $1 per option contract to June 1, 
2012. The Exchange proposes to extend the program for one year.
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    \4\ See Securities Exchange Act Release No. 63475 (December 8, 
2010), 75 FR 77932 (December 14, 2010) (SR-NYSE Amex-2010-114).
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    An ``accommodation'' or ``cabinet'' trade refers to trades in 
listed options on the Exchange that are worthless or not actively 
traded. Cabinet trading is generally conducted in accordance with the 
Exchange Rules, except as provided in Exchange Rule 968NY Accommodation 
Transactions (Cabinet Trades), which sets forth specific procedures for 
engaging in cabinet trades. Rule 968NY currently provides for cabinet 
transactions to occur via open outcry at a cabinet price of a $1 per 
option contract in any options series open for trading in the Exchange, 
except that the Rule is not applicable to trading in option classes 
participating in the Penny Pilot Program. Under the procedures, bids 
and offers (whether opening or closing a position) at a price of $1 per 
option contract may be represented in the trading crowd by a Floor 
Broker or by a Market-Maker or provided in response to a request by a 
Trading Official, a Floor Broker or a Market-Maker, but must yield 
priority to all resting orders in the Cabinet (those orders held by the 
Trading Official, and which resting cabinet orders may be closing 
only). So long as both the buyer and the seller yield to orders resting 
in the cabinet book, opening cabinet bids can trade with opening 
cabinet offers at $1 per option contract.
    The Exchange has temporarily amended the procedures through June 1, 
2011 to allow transactions to take place in open outcry at a price of 
at least $0 but less than $1 per option contract. These lower priced 
transactions are permitted to be traded pursuant to the same procedures 
applicable to $1 cabinet trades, except that (i) bids and offers for 
opening transactions are only permitted to accommodate closing 
transactions in order to limit use of the procedure to liquidations of 
existing positions, and (ii) the procedures are also made available for 
trading in option classes participating in the Penny Pilot Program.\5\ 
The Exchange believes that allowing a price of at least $0 but less 
than $1 better accommodates the closing of options positions in series 
that are worthless or not actively traded, particularly due to recent 
market conditions which have resulted in a significant number of series 
being out-of-the-money. For example, a market participant might have a 
long position in a call series with a strike price of $100 and the 
underlying stock might be trading at $30. In such an instance, there 
might not otherwise be a market for that person to close-out the 
position even at the $1 cabinet price (e.g., the series might be quoted 
no bid).
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    \5\ Currently the $1 cabinet trading procedures are limited to 
options classes traded in $0.05 or $0.10 standard increment. The $1 
cabinet trading procedures are not available in Penny Pilot Program 
classes because in those classes an option series can trade in a 
standard increment as low as $0.01 per share (or $1.00 per option 
contract with a 100 share multiplier). Because the temporary 
procedures allow trading below $0.01 per share (or $1.00 per option 
contract with a 100 share multiplier), the procedures are available 
for all classes, including those classes participating in the Penny 
Pilot Program.
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    As with other accommodation liquidations under Rule 968NY, 
transactions that occur for less than $1 will not be disseminated to 
the public on the consolidated tape. In addition, as with other 
accommodation liquidations under Rule 968NY the transactions will be 
exempt from the Consolidated Options Audit Trail (``COATS'') 
requirements of Exchange Rule 955NY Order Format and System Entry 
Requirements. However, the Exchange will maintain quotation, order and 
transaction information for the transactions in the same format as the 
COATS data is maintained. In this regard, all transactions for less 
than $1 must be reported to the Exchange

[[Page 27137]]

following the close of each business day.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) \6\ of the Securities Exchange Act of 1934 (the ``Act''), 
in general, and furthers the objectives of Section 6(b)(5) \7\ in 
particular in that 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. The Exchange believes that allowing 
for liquidations at a price less than $1 per option contract will 
better facilitate the closing of options positions that are worthless 
or not actively trading, especially in Penny Pilot issues where Cabinet 
Trades are not otherwise permitted.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

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

    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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\ 
Because the foregoing 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, it has become effective pursuant to 
19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\
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    \8\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file 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. 
NYSE Amex has satisfied this requirement.
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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 (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEAmex-2011-31 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-NYSEAmex-2011-31. This 
file number 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 Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street, NE., Washington, DC 20549, on official business days between 
the hours of 10 a.m. and 3 p.m. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSEAmex-2011-31 and should be submitted on or before May 31, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-11318 Filed 5-9-11; 8:45 am]
BILLING CODE 8011-01-P


