
[Federal Register Volume 78, Number 175 (Tuesday, September 10, 2013)]
[Notices]
[Pages 55312-55316]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-21928]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70317; File No. SR-NYSEArca-2013-42]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of a Proposed Rule Change Amending Rule 6.72 To Make Permanent the 
Penny Trading Program for Options

September 4, 2013.

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on August 20, 2013, 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, II 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend Rule 6.72 to make permanent the 
penny trading program for options. 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 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 these 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 amend Rule 6.72 to make permanent 
the penny trading program in options (the ``Program''), which was 
approved on a limited pilot basis on January 23, 2007 (the ``Penny 
Pilot'' or, the ``Pilot''), and has been expanded and extended numerous 
times since.\3\
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    \3\ Exchange Act Release No. 55156 (January 23, 2007) 72 FR 4759 
(February 1, 2007) (NYSEArca-2006-73); Release No. 56150 (July 26, 
2007) 72 FR 42460 (August 2, 2007) (NYSEArca-2007-56); Release No. 
56568 (September 27, 2007) 72 FR 56422 (October 3, 2007) (NYSEArca-
2007-88); Release No. 59628 (March 26, 2009) 74 FR 15025 (NYSEArca-
2009-26); Release No. 60224 (July 1, 2009) 74 FR 32991 (July 9, 
2009) (NYSEArca-2009-61); Release No. 60711 (September 23, 2009) 74 
FR 49419 (September 28, 2009) (NYSEArca-2009-44); Release No. 61061 
(November 24, 2009) 74 FR 62857 (December 1, 2009) (NYSEArca-2009-
44); Release No. 63376 (November 24, 2010) 75 FR 75527 (December 3, 
2010) (NYSEArca-2010-104); Release No. 65977 (December 15, 2011) 76 
FR 79234 (NYSEArca-2011-93); Release No. 67307 (June 28, 2012) 77 FR 
40110 (July 6, 2012) (NYSEArca-2012-65); Release No. 68426 (December 
13, 2012) 77 FR 75224 (December 19, 2012) (NYSEArca-2012-135); 
Release No. 69106 (March 11, 2013) 78 FR 16552 (March 15, 2013) 
(NYSEArca-2013-22); Release No. 69790 (June 18, 2013) 78 FR 37853 
(June 24, 2013) (NYSE Arca-2013-59).
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    NYSE Arca, having demonstrated the benefits of options trading in 
pennies for customers through numerous studies, proposes to make the 
Program permanent, but on a reduced level. NYSE Arca proposes that the 
Program be limited to the 150 most active multiply listed options 
classes.
Analysis of the Current Program
    Under the Penny Pilot, the Program is currently available for 363 
listed options classes. NYSE Arca conducted an analysis of penny 
trading in options to determine the effectiveness of the Penny Pilot 
within the full range of the Pilot issues. Since the Pilot was expanded 
over the time period of November 2009 to August 2010, the Exchange 
reviewed data from the last two full calendar years.
    The Exchange determined that, while the overall Pilot was of great 
benefit to Customers and provide [sic] greater opportunities to all 
market participants, the benefits have been concentrated in the 150 
most active Penny Pilot issues (the ``Top 150''), and that the Pilot 
issues outside of the Top 150 (the ``Bottom 203'') \4\ not only failed 
to reap a benefit from penny trading, but resulted in more technology 
overhead costs to provide for capacity and speed for quote activity, 
and lagged the overall market in volume and in various performance 
statistics. As part of its analysis, the Exchange reviewed quote-to-
volume ratios for the Top 150, the Bottom 203, and the Top 200 non-
Penny Pilot issues.\5\
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    \4\ For purposes of consistency, the study was conducted on 
issues that were in the Penny Pilot as of the end of 2012 and added 
to the Pilot no later than January 2011, thus excluding 9 issues. 
One other issue was excluded due to extenuating circumstances of the 
underlying. The total number of issues studied was 353. For a more 
detailed discussion on methodology, see NYSE U.S. Options Report on 
Penny Trading in Options 2012, attached as Exhibit 3 to the 
proposing Rule change.
    \5\ Study period was January through October, 2012. The time 
frame was chosen to allow for a year over year comparison period in 
which the Penny Pilot was completely rolled out to 363 issues.
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    The Exchange found the following:

                          Quote to Volume Ratio
                        [January to October 2012]
------------------------------------------------------------------------
                  Segment                           Quote/Contract
------------------------------------------------------------------------
Top 50 Penny Pilot Issues..................  176 to 1.
Top 150 Penny Pilot Issues.................  216 to 1.
Top 200 Non Penny Issues...................  514 to 1.
Bottom 203.................................  589 to 1.
------------------------------------------------------------------------

    The Exchange believes that the quote-to-volume ratios demonstrate 
that the

[[Page 55313]]

reduced minimum price variation (``MPV'') applicable to issues in the 
Penny Pilot provides significant efficiencies in the most active names, 
but provides a great deal of unnecessary quote traffic in the less 
active issues. Indeed, the non-Penny Pilot issues studied were 12.7% 
more efficient than the Bottom 203.
    The Exchange also found that trading volume in Penny Pilot issues 
is almost all concentrated in the Top 150. In 2011, 89.1% of Penny 
Pilot volume was in the Top 150, and continued at a rate of 90.8% for 
2012.
    From 2011 to 2012, trading volumes in the Top 150 declined 11.6%, 
whereas the Bottom 203 declined 26.9%. Given a year-over-year decline 
in options industry volume of 12.2%, the Bottom 203 underperformed the 
industry by 14.7%.
    The Exchange anticipates that there may be some investor concern 
regarding a widening of the minimum price variation in some issues. But 
the Exchange believes that such concerns are offset by the significant 
widths and lack of liquidity of market spreads in lower tier Penny 
Pilot issues as well as the availability of mechanisms for price 
improvement in today's modern options industry. First, notwithstanding 
the smaller MPV for Penny Pilot issues, it has not contributed to 
market spreads less than $0.05 in most Penny Pilot issues. For example, 
in April 2012, the average NBBO spread in the Top 10 most active Penny 
Pilot issues was $0.25, while the spread in the 20 least active Penny 
Pilot issues was $0.60. And, despite the wider spread, the average size 
at the NBBO in the less active names is often less than 25 contracts. 
The Exchange believes that an MPV of $0.05 or higher for an issue with 
a $0.60 spread is not an unreasonable ratio.
    Second, if a market participant is interested in an execution in a 
penny increment, such opportunities are available with certain price 
improvement mechanisms. For example, the Price Improvement Period 
(``PIP'') \6\ of the BOX Options Exchange LLC (``BOX'') auction process 
provides an opportunity for penny incremented price improvement for 
series with a $0.05 MPV. From December 2012 to February 2013, 69.2% of 
the contracts submitted to the PIP in series with a $0.05 MPV received 
price improvement, while only 17.4% of the contracts submitted to the 
PIP in $0.01 series were price improved.\7\ With a number of exchanges 
now offering auction price improvement mechanisms, Customers wishing to 
trade an order within the NBBO in an increment finer than $0.05 and for 
size greater than the average NBBO may do so through competitive 
mechanisms.
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    \6\ See BOX Rule 7150 Price Improvement Period (``PIP).
    \7\ See http://boxexchange.com/regulatory-circulars/pilot-reports/.
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    The Exchange considers that given the existing quote width in most 
Penny Pilot series, a change in MPV resulting from reducing the number 
of issues available for penny trading will be unlikely to have any 
material impact on spread widths.
Proposal for a Permanent Program
    NYSE Arca proposes the Penny Pilot for Options be approved as a 
permanent program, but on a smaller scale. The Exchange proposes 
reducing the number of issues in the Program to the 150 most active 
issues currently in the Program effective the monthly expiration three 
months following approval of this filing. The Exchange does not propose 
to change any aspects of the structure of the Program other than the 
number of underlying issues in the Program and certain details 
regarding the processes for adding and removing options on certain 
issues that are subject to the Program. All options contracts in QQQ 
(PowerShares QQQ TrustSM, Series 1), SPY (SPDR S&P 500 ETF) and IWM 
(iShares Russell 2000 Index Fund) will continue to quote in $0.01 
increments; all other options contracts in the Program trading under $3 
will continue to quote in $0.01 increments, and all other option 
contracts in the Program trading at or above $3 will trade in $0.05 
increments. NYSE Arca makes this proposal for a reduced Program based 
on the numerous previously published studies of the Pilot. Through 
these studies, the options industry has extensive understanding of the 
benefits to Customers of the Pilot and the burdens on quote traffic and 
capacity caused by the Pilot. Over the life of the Pilot, the Exchange 
has studied quote traffic with an expectation that quote traffic would 
increase because of more quoting price points, but also with the 
expectation that the increased quote traffic would provide increased 
trading activity. The Exchange believes that the Pilot, as a whole, has 
largely met these expectations. However, our study has shown that the 
anticipated benefits have been concentrated in the Top 150 issues. 
Further, our study shows that quote traffic in the lower tier issues 
has increased significantly without a corresponding increase in volume. 
Previous Pilot reports did not identify the disparity as they did not 
examine the Quote to Trade ratio at various volume levels and tiers. 
While the Exchange proposes permanent approval on terms different from 
the Pilot, it does so after analysis of the Pilot (as outlined in the 
Report) following the increase in issues in the Pilot starting in the 
fall of 2009.
    NYSE Arca notes that a reduced program does not need to be 
continued as a Pilot, as the various markets and market participants 
have already studied the Program at roughly that level on a Pilot basis 
in 2009 and 2010 during expansion of the Pilot. The Exchange and other 
markets all studied the Pilot at various levels throughout the Pilot, 
and consistently found that as an overall program, the Pilot was of 
benefit to Customers and had a minimal impact on the industry. Further 
study of the program on a Pilot basis would not reveal anything not 
already available. While the Quote to Trade ratio was not studied under 
the original Pilot Reports, the recent NYSE U.S. Options Report looked 
closely at the Quote to Trade ratio by volume group; a Pilot study of 
the Top 150 would retrace what was already studied in the Report. The 
previous Reports looked at quote traffic from an overall perspective, 
with the expectation that quote traffic would increase but be offset by 
a benefit to the investing public because of narrowed spreads and more 
price points. Overall, that is still true. The attached Report, 
however, is the first to look at the benefit of the added quote traffic 
by comparing the number of quotes per trade. The study found a robust 
volume of trades for a given quote level in the most active issues, but 
an exorbitant number of quotes per trade in the lower volume Pilot 
issues, indeed at a rate far higher than in non-Pilot issues.
    In adopting a reduction to the Program, the Exchange does not 
believe further statistical analysis is needed and, accordingly, does 
not feel that a reduced Program should continue on a pilot basis. An 
additional pilot with a reduced number of issues would not reveal 
additional information or nuance. The attached Report looked at quote 
traffic over a significant time period, and found consistent behavior 
over time. Upon approval of this filing, an issue would remain in the 
Program if it qualified based on volume even if the price was over $200 
per share, but, consistent with current practice under the Pilot, an 
issue must be trading under $200 per share to be added to the Program. 
An issue would not be removed from the Program based on price, but only 
on failure to stay in the

[[Page 55314]]

150 most actively traded issues. Issues to be removed following 
approval will convert back to trading in standard increments of $0.05 
and $0.10, but effective on the Monday following the third monthly 
expiration following approval, to give investors and traders time to 
prepare for the larger quoting increment.
    Starting in January 2014, the Exchange also proposes an annual 
review of issues that are in the Program, so that the Program generally 
includes the 150 most active options issues. After each annual review, 
issues that are no longer in the 150 most active issues but are still 
among the 200 most active will continue in the Program, while issues 
that are removed will be replaced by issues that have become among the 
150 most active and also priced below $200 per share. The replacement 
issues will be ranked based on trading activity in the preceding six 
full calendar months,\8\ and added, based on ranking and available 
space in the Program, on the first business day following January 
expiration. The reason for the limited removal from the Program is to 
reduce confusion if an issue is still active but is no longer in the 
150 most active issues. The Program will thus have no more than 150 
issues except for the period when issues to be removed are still 
trading in a penny increment. By remaining in the program, investors 
and traders will experience a continuity in trading practices. Issues 
that fall below the 200 most actives will be converted back to trading 
in standard increments of $0.05 and $0.10, but not until the first 
business day after April expiration, to give investors and traders time 
to prepare for the larger quoting increment. The Exchange finds it 
necessary to have these steps to insure an orderly transition of an 
issue out of the program. Announcements of issues to be added and to be 
phased out will be made at the end of the first full week of each year 
via Trader Update bulletin.\9\
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    \8\ The preceding six full calendar months for the annual review 
will be July 1 through December 31.
    \9\ As under the current Rule, the Exchange will continue to 
publish such bulletins on its Web site.
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    An Exchange review of the most actively traded options issues over 
the last three years shows that approximately 30 issues each year fall 
out of the 150 most actives, with approximately 10 of those 30 falling 
out of the 200 most active. Of the issues that fall in the range of 
151st to 200th most active, there is a meaningful chance that they will 
again be in the 150 most active.\10\ By reducing the movement out of 
the Program for issues which are still relatively active, investor 
confusion will be reduced.
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    \10\ In 2011, 10 issues previously in the top 150 in 2010 fell 
into the 151-200th segment. Of these 10 issues, 6 were ranked in the 
top 150 symbols in 2012, 3 fell past the 200th rank and would be 
removed from the Program, and 1 remained in the 151-200th segment. 
In 2012, 12 issues previously in the top 150 in 2011 fell into the 
151-200th segment. Of these 12 issues, 6 were ranked in the top 150 
in 2013, 5 fell below the 200th rank, and 1 remained in the 151-
200th segment.
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    Under the Pilot, issues that were no longer trading or where the 
options class had been delisted were only replaced once all existing 
series had expired or been delisted. This often had the effect of a 
defunct issue taking a slot in the program for an extended period of 
time because of LEAP series. For instance, an issue that went bankrupt 
in the Fall of 2008, just shortly after the listing of January 2011 
LEAPs, remained in the program for over two years (until the January 
2011 LEAP expired). With the proposed changes to the administration of 
a permanent program, and with the ability to remove issues from the 
Program, the Exchange proposes that issues that will not be adding any 
more series be removed from the active list of Program issues, so that 
they may be replaced with options issues that have become among the 
most active, and thus are available for trading in the finer increment.
    NYSE Arca proposes that issues that are no longer available for 
listing new series because of delisting of the options class, or 
because they have been identified by OCC as no longer eligible for 
opening customer transactions will be removed from the list of active 
issues under the Program, and will be replaced in the Program at the 
beginning of the next quarter. Under certain circumstances, OCC 
notifies the exchanges that it will no longer permit new positions to 
be opened. NYSE Arca proposes this standard because when these events 
occur, the issues are set to prohibit Customer transactions that open a 
position. As a result, the activity level decreases such that it would 
be incapable of remaining in the Top 150 due to volume. However, any 
remaining series will continue to trade under the Program until they 
expire.
    When adding new issues to replace an options class participating in 
the Program being removed because of being delisted or because they 
have been identified by OCC as ineligible for opening Customer 
transactions, the Exchange will use trading activity for the previous 
six full calendar months to determine the Top 150 issues based on 
trading volume.\11\ Replacement issues for issues that have been 
disqualified will be placed in the Program on the first business day 
following the first monthly expiration of each calendar quarter. 
Because the new issues are added at least ten business days into the 
month, rather than the second day of the month as is done under the 
Pilot, the Exchange will use the most recent six full calendar months. 
The new issues will be announced in a Trader Update bulletin that is 
disseminated no later than the Friday before Expiration week. Any 
series in the issues that are being replaced (because of delisting or 
because they are ineligible for opening Customer transactions) will 
continue to trade under the Program until they expire. When an issue is 
being delisted or identified as ineligible for opening Customer 
transactions, the Exchange does not add any new series, and the 
existing series are generally set to ``closing only'', that is, set to 
not permit a Customer to open or extend a position.
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    \11\ For instance, a quarterly review in October would use the 
preceding six full calendar months from April 1 through September 
30.
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    For issues that are no longer active enough to remain in the 
Program (i.e., no longer in the 200 most active following annual 
review), they will trade in nickel and dime increments effective after 
three monthly expirations, and the Exchange will announce via Trader 
Update bulletin at least one month in advance if orders for such issues 
in the Consolidated Book will be cancelled or if they will be converted 
to Price Improving Orders as described in Rule 6.62(s). Thus the 
Program may have more than 150 issues, and for those being removed from 
the Program, there will be sufficient notice to market participants 
that series in an issue will convert to nickel and dime quoting.
    Lastly, the Program will also apply to any option classes that are 
selected by other securities exchanges that employ a similar program 
that provides for quoting and trading in penny increments under their 
respective rules.
    The Rule will be effective the first business day after monthly 
expiration three months following approval.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Securities Exchange Act of 1934 (the ``Act''),\12\ in 
general, and furthers the objectives of Section 6(b)(5) of the Act,\13\ 
in particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in

[[Page 55315]]

general, to protect investors and the public interest. In particular, 
the proposed rule change would provide OTP Holders and market 
participants with a permanent program for penny trading in options that 
will provide the greatest benefit to investors while minimizing the 
burden that a finer trading increment places on quote traffic.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    Further, NYSE Arca notes that trading in penny increments has been 
demonstrated to remove impediments to trading in the national market 
system by providing a smaller pricing increment, but only in the Top 
150 issues. The various reports, especially the NYSE U.S. Options 
Report on Penny Trading in Options 2012, show that the benefits to 
investors are overwhelmingly in the Top 150 issues, and that little 
additional benefit accrues in the Bottom 200. Because of this 
differential in benefit because of activity level, the Exchange 
believes that initially limiting the Program to 150 issues, and in 
subsequent years by not removing an issue that is still among the 200 
most active multiply listed, the Program will be the appropriate size.
    By providing sufficient notice of the changes to the Program, 
investor confusion will be greatly reduced. Those issues that will be 
delisted or because of the underlying security no longer being a 
covered security, will continue to trade under the Program until all 
the series have expired. Those issues that no longer qualify as being 
in the 150 most active issues (or the 200 most active issues after the 
annual review) will not convert to nickel and dime increment quoting 
until three monthly expirations have passed, to give investors 
sufficient time to prepare. These transition times and the provision to 
not oust issues that are no longer in the 150 most active but still 
actively traded will reduce investor confusion.
    NYSE Arca believes the Commission now has an opportunity to perfect 
the mechanism of a free and open market by making the Program 
permanent.

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. Since the proposal will 
reduce industry quote traffic, it promotes price and quote size 
competition while easing the burden of repeated quote updates that 
provide little economic benefit.
    There would be an extreme burden placed on the competitiveness of 
NYSE Arca if the proposed rule change is approved while other exchanges 
do not reduce the number of issues trading in penny increments. The 
Program, therefore, will also apply to any option classes that are 
selected by other securities exchanges that employ a similar penny 
trading program under their respective rules.
    The Exchange would, however, recommend to the Commission, at the 
time of other exchange's filings to extend their Pilot or to make the 
program permanent, to have other markets demonstrate the benefit of not 
reducing the Program to 150 issues, given the burden on quote traffic 
by a broader program and the lack of market quality demonstrated by the 
widened spreads and lack of liquidity in the current Pilot. While the 
Exchange found the level of quote traffic acceptable in previous 
studies, it was only under the new study that the Exchange looked at 
the Quote to Trade ratio of differing volume tranches. It was only on 
doing so that it was revealed that the anticipated benefits of the 
Pilot were not being realized consistently in lower volume issues.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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. The Commission requests comments, in 
particular, on the following aspects of the proposed rule change:
    1. The Commission has previously noted that allowing market 
participants to quote in smaller increments has been shown to reduce 
spreads in options classes included in the Penny Pilot Program, thereby 
lowering costs to investors.\14\ The Commission has also recognized 
that the options exchanges have previously shown in their pilot reports 
that there has been a reduction in the displayed size available in the 
Pilot classes.\15\ The current Penny Pilot Program allows penny quoting 
and trading in 363 options classes. What are the benefits or harms to 
investors that might result from reducing the number of options classes 
to a number less than the current 363 options classes in a permanent 
penny program? Specifically, what are the benefits or harms to 
investors that might result from reducing the number of options classes 
in a permanent penny program to the 150 most actively traded multiply 
listed options classes, as proposed?
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    \14\ See Securities Exchange Act Release No. 60711 (September 
23, 2009) 74 FR 49419, 49421 (September 28, 2009) (NYSEArca-2009-
44).
    \15\ Id. at 49422.
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    2. What are commenters' views on NYSE Arca's proposal to limit the 
proposed permanent penny program to the 150 most actively traded 
multiply listed options classes based on trading activity in the 
previous six months? Please explain.
    a. If you agree with basing inclusion on the most actively traded 
multiply listed options classes, what are your views on NYSE Arca's 
proposal to include the 150 most actively traded multiply listed 
options classes? Please explain.
    b. If you believe that inclusion of options classes in the proposed 
permanent penny program should be based on different criteria, what 
criteria, and why?
    3. What are commenters' views on NYSE Arca's proposal to use the 
previous six months of trading activity to determine the 150 most 
actively traded multiply listed options classes? Please explain. Should 
this timeframe be extended or shortened? Why or why not? If so, by how 
many days or months, and why?
    4. NYSE Arca proposes that once an issue is in the proposed 
permanent penny program, the issue will remain in the proposed 
permanent penny program until it is no longer among the 200 most 
actively traded issues based on an annual review. Upon falling below 
the 200 most actively traded issues, an issue will be removed from the 
proposed permanent penny program. What are commenters' views on the 
proposal's process to remove an options class from the proposed 
permanent penny program that falls below the 200 most actively traded 
issues? Please explain.

[[Page 55316]]

    5. Do commenters have any concerns about how an option class might 
trade between the time notice has been given that the option class will 
be removed from the proposed permanent penny program and the time 
options in that class begin trading in standard increments? Please 
explain.
    6. What are commenters' views on NYSE Arca's proposal to conduct a 
review on an annual basis? Please explain. Should such a review 
interval be more or less frequent? Please explain.
    7. Do commenters believe that the use of the two proposed market 
activity levels (150 most actively traded listed options classes and 
200 most actively traded issues) would cause confusion among market 
participants? Why or why not? Do you believe the use of the two 
proposed market activity levels would provide an appropriate mechanism 
to transition options classes in and out of the proposed permanent 
penny program? Why or why not?
    8. NYSE Arca proposes to replace any options classes participating 
in the Program that have been delisted, or are identified by OCC as 
ineligible for opening Customer transactions, with the next most 
actively traded multiply listed options classes that are not yet 
included in the Program, based on trading activity in the previous six 
full calendar months. NYSE Arca proposes that any series in a class 
overlying the issues that are being replaced would continue to trade 
under the proposed permanent penny program until they expire. The 
replacement issue would be added to the proposed permanent penny 
program at the beginning of the next quarter. What are commenters' 
views on NYSE Arca's process to replace options classes that have been 
delisted or are identified by OCC as ineligible for opening Customer 
transactions? Please explain.
    9. What are commenters' views on whether the minimum quoting 
increment should be the same or different across all exchanges trading 
the same option? What are the advantages and disadvantages to adopting 
a uniform permanent penny program as compared to exchange specific 
permanent penny programs? Please be specific.
    10. Commenters are requested to provide empirical data and other 
factual support for their views, if possible.
    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 email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2013-42 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-NYSEArca-2013-42. 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 (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 
10:00 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-NYSEArca-2013-42 and should 
be submitted on or before October 1, 2013.
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    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-21928 Filed 9-9-13; 8:45 am]
BILLING CODE 8011-01-P


