
[Federal Register Volume 76, Number 120 (Wednesday, June 22, 2011)]
[Notices]
[Pages 36604-36606]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-15606]



[[Page 36604]]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64692; File No. SR-NYSEArca-2011-37]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Amending Rules 5.30 
and 5.32 To Permit the Exchange To List Flexible Exchange Options on 
Index and Equity Securities That Are Eligible for Non-FLEX Options 
Trading, and That Have Non-FLEX Options on Such Index and Equity 
Securities Listed and Traded on at Least One National Securities 
Exchange, Even if the Exchange Does Not List Such Non-FLEX Options

June 16, 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 June 3, 2011, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Rules 5.30 and 5.32 to permit the 
Exchange to list Flexible Exchange Options (``FLEX Options'') on index 
and equity securities that are eligible for Non-FLEX Options trading, 
and that have Non-FLEX Options on such index and equity securities 
listed and traded on at least one national securities exchange, even if 
the Exchange does not list such Non-FLEX Options. The text of the 
proposed rule change is available at the Exchange, the Commission's 
Public Reference Room, and http://www.nyse.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to amend Rule 5.30 Applicability, 
Definitions, and References, and Rule 5.32, Terms of FLEX Options, to 
delete obsolete references and to permit trading of FLEX Options series 
in securities whose Non-FLEX Options are listed and traded on a 
national securities exchange(s), based on a recently adopted rule 
change of the Chicago Board Options Exchange (``CBOE'').\4\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 60585 (August 28, 
2009), 74 FR 46257 (September 8, 2009). Unlike CBOE's rule, we have 
clarified that our proposed rule would only permit the trading of 
FLEX Options on securities whose Non-Flex Options are listed and 
traded on at least one options exchange.
---------------------------------------------------------------------------

    Rules 5.30(a)(1) and 5.32(e)(1) currently permit FLEX Index Options 
on only four specific indexes, none of which are currently listed or 
traded on the Exchange. In addition, Rule 5.30(a)(2) currently permits 
FLEX Options on only one Exchange-Traded Fund Share (``ETF''). The 
Commission originally only approved trading of FLEX Options on a 
limited number of index products,\5\ prior to approval of generic 
listing standards for index options, and the Exchange adopted rule text 
in a rule filing that restricted FLEX options to only one ETF, despite 
other general rule language in that rule filing that permitted FLEX 
options on any ETF.\6\ In 2004, the Exchange had, in fact, deleted the 
references to specific indexes and to a specific ETF in the rules noted 
above,\7\ but inadvertently reinstated the deleted text in a 
contemporaneous filing.\8\ Subsequent listing of options on other index 
products did not include updating the relevant rule text in Rules 5.30 
or 5.32.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 34364 (July 13, 
1994), 59 FR 36813 (July 19, 1994).
    \6\ See Exchange Act Release No. 34-44025 (February 28, 2001), 
66 FR 13986 (March 8, 2001). In particular, as part of this rule 
filing, the Exchange adopted the following rule text in Rule 
8.102(f)(1), ``FLEX Equity Option transactions are limited to 
transactions in options on underlying securities or Exchange-Traded 
Fund Shares that have been approved by the Exchange in accordance 
with Rule 3.6.'' Rule 8.102 was subsequently renumbered as Rule 
5.32.
    \7\ See Securities Exchange Act Release No. 49340 (February 27, 
2004), 69 FR 10804 (March 8, 2004) (Notice of Filing and Immediate 
Effectiveness of PCX-2004-06).
    \8\ See Securities Exchange Act Release No. 49718 (May 17, 
2004), 69 FR 29611 (May 24, 2004) (Order Approving PCX-2004-08).
---------------------------------------------------------------------------

    The deletion of the restrictive language in Rules 5.30 and 5.32 
will be accompanied by the adoption of new rule text, by which the 
Exchange is proposing to adopt a rule change similar to a rule change 
recently adopted by the CBOE to allow FLEX Equity Options \9\ on any 
security that meets the standards of NYSE Arca Rule 5.3, and that has 
Non-FLEX Options on such security listed and traded on at least one 
options exchange, regardless of whether the Exchange trades such Non-
FLEX Options.
---------------------------------------------------------------------------

    \9\ The Commission notes that options on ETFs, as discussed 
above, are considered FLEX Equity Options under NYSE Arca's rules. 
See NYSE Arca Rule 5.30(b)(5).
---------------------------------------------------------------------------

    Similarly, the CBOE rule change also adopted a provision to allow 
FLEX Index Options on any index that meets its listing standards. NYSE 
Arca proposes to adopt a similar provision that would permit FLEX Index 
Options on any index that meets the standards of Rule 5.12 or 5.13, and 
that has Non-FLEX Options on such index listed and traded on at least 
one options exchange, even if the Exchange does not list and trade such 
Non-FLEX Options.
    As an alternative to the over-the-counter marketplace and other 
national security exchanges, the Exchange proposes in this rule filing 
to increase the spectrum of indexes and equity securities that are 
eligible for FLEX Options trading on the Exchange, even if the Exchange 
does not list Non-FLEX Options on such indexes or equity securities. In 
this regard, the Exchange does not list options on every NMS stock or 
index that is eligible for options trading, even if permitted to do so 
according to its listing standards, but recognizes that market 
participants may want access to options on such indexes and equity 
securities, subject to the certainty and safeguards that a regulated 
and standardized marketplace provides.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act \10\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act, in that it is designed to promote just and 
equitable principles of trade, remove impediments to and perfect the 
mechanisms of a free and open market and a national market system and, 
in general, to protect investors and the public interest. The Exchange 
believes that its proposal to permit the Exchange to list FLEX Options 
on indexes and equity securities that are eligible for

[[Page 36605]]

Non-FLEX Options trading and whose Non-FLEX Options are listed and 
traded on at least one national securities exchange, even if the 
Exchange does not list such Non-FLEX Options, would provide market 
participants with additional means to manage their risk exposures and 
carry out their investment objectives with listed options. In this 
regard, the Exchange's proposal would increase competition in the FLEX 
Options market. In addition, the Exchange's proposal is consistent with 
investor protection and the public interest in that it is limited to 
FLEX Options on securities that would be eligible to have, and in fact 
have, Non-FLEX Options listed and traded on them. The criteria for such 
underlying securities has been carefully crafted over the years to 
ensure that only appropriate securities have standardized options 
listed on them (e.g., securities with sufficient trading volume and 
shareholders).
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
---------------------------------------------------------------------------

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

    Because the proposed rule change: (i) Does not significantly affect 
the protection of investors or the public interest; (ii) does not 
impose any significant burden on competition; and (iii) does not become 
operative for 30 days after the date of the filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest, the proposed rule change has 
become effective pursuant to Section 19(b)(3)(A) of the Act \11\ and 
Rule 19b-4(f)(6) thereunder.\12\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii) 
under the Act, the Exchange is required to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Commission notes that the Exchange has satisfied this 
requirement.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \13\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \14\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay so 
that the Exchange could immediately list FLEX Options on indexes and 
equity securities that are eligible for non-FLEX Options trading, and 
that have non-FLEX Options on such index and equity securities listed 
and traded on at least one national securities exchange, even if the 
Exchange does not list non-FLEX Options on such indexes and equity 
securities. In support of the waiver, the Exchange believes that its 
proposal is consistent with CBOE's rules, which were previously 
published for public comment, and would allow the Exchange to 
immediately compete with other exchanges for the trading of such FLEX 
Options.
---------------------------------------------------------------------------

    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The Commission believes that waiver of the operative delay is 
consistent with the protection of investors and the public interest. In 
making this determination, the Commission notes that NYSE Arca's 
proposed rule change is substantially similar to CBOE's FLEX rules, 
which also permit CBOE to list FLEX options on securities that are 
eligible for non-FLEX options trading, even if CBOE does not list non-
FLEX options on such securities.\15\ The Commission notes that the 
CBOE's proposal was subject to full notice and comment, and the 
Commission received no comments on CBOE's rule proposal. Further, the 
Commission notes that NYSE Arca's proposal adds clarification to the 
rules, noting expressly that its rules would only permit the trading of 
FLEX Options on securities whose non-FLEX Options are listed and traded 
on at least one national securities exchange. This provision will help 
to ensure that adequate exchange requirements are met for trading these 
products and that the FLEX market will provide an alternative to 
certain investors that want to customize specified options terms not 
available in the standardized market. In addition to the factors noted 
above, the Commission also believes that waiver of the operative delay 
will allow the NYSE Arca to immediately compete with other exchanges 
for the trading of such FLEX options, thereby providing investors 
another venue on which to trade these products. For these reasons, the 
Commission designates, consistent with the protection of investors and 
the public interest, that the proposed rule change become operative 
immediately upon filing.\16\
---------------------------------------------------------------------------

    \15\ See supra note 4.
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend the 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 No. SR-NYSEArca-2011-37 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 No. SR-NYSEArca-2011-37. 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

[[Page 36606]]

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 No. SR-NYSEArca-2011-37 and should be submitted on or before July 
13, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

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

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-15606 Filed 6-21-11; 8:45 am]
BILLING CODE 8011-01-P


