
[Federal Register Volume 79, Number 66 (Monday, April 7, 2014)]
[Notices]
[Pages 19160-19162]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-07641]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71844; File No. SR-NYSEMKT-2014-26]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Amending Its Option 
Trading Rules To Extend the Operation of Its Pilot Program Regarding 
Minimum Value Sizes for Opening Transactions in New Series of Flexible 
Exchange Options

April 1, 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 27, 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.
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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 amend its option trading rules to extend 
the operation of its pilot program (``Pilot Program'') regarding 
minimum value sizes for flexible exchange options (``FLEX Options'' or 
``FLEX''), currently scheduled to expire on March 31, 2014 until the 
earlier of July 31, 2014 or approval of the Exchange's proposal to 
adopt the Pilot Program on a permanent basis. 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 hereby proposes to amend its option trading rules to 
extend the operation of its Pilot Program regarding minimum value sizes 
for opening transactions in new FLEX series, currently scheduled to 
expire on March 31, 2014,\4\ until July 31, 2014. The Exchange has 
submitted a separate filing to the Commission proposing to adopt the 
existing Pilot Program on a permanent basis.\5\ The Exchange is 
submitting this proposed four-month extension of the Pilot Program so 
that the program may continue to operate uninterrupted while the 
Commission considers the Exchange's proposed adoption of the Pilot 
Program on a permanent basis. Accordingly, the proposed extension to 
the Pilot Program will end the earlier of July 31, 2014 or approval of 
the Exchange's proposal to adopt the Pilot Program on a permanent 
basis.
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    \4\ See Securities Exchange Act Release No. 69255 (March 28, 
2013), 78 FR 20158 (April 3, 2013) (SR-NYSEMKT-2013-28).
    \5\ SR-NYSEMKT-2014-21 requesting permanent adoption of the 
Pilot Program was submitted to the Commission on March 17 [sic], 
2014.
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    This filing does not propose any substantive changes to the Pilot 
Program and contemplates that all other terms of FLEX Options will 
remain the same. Overall, the Exchange believes that extending the 
Pilot Program will benefit public customers and other market 
participants who will be able to use FLEX Options to manage risk for 
smaller portfolios. In support of the proposed extension of the Pilot 
Program, and as required by the terms of the Pilot Program's 
implementation,\6\ the Exchange has submitted to the Commission a Pilot 
Program Report that provides an analysis of the Pilot Program covering 
the period during which the Pilot Program has been in effect. This 
Pilot Program Report includes (i) data and analysis on the open 
interest and trading volume in (a) FLEX Equity Options in new series 
that have opening transactions with a minimum size of 0 to 249 
contracts and less than $1 million in underlying value; (b) FLEX Index 
Options in new series that have opening transactions with a minimum 
opening size of less than $10 million in underlying equivalent value; 
and (ii) analysis on the types of investors that initiated opening FLEX 
Equity and Index Options transactions in new series (i.e., 
institutional, high net worth, or retail). The report has been 
submitted to the Commission as Exhibit 3 to SR-NYSEMKT-2013-21 \7\ 
[sic].
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    \6\ See infra note 7 [sic].
    \7\ Supra note 5.
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    The Exchange believes that there is sufficient investor interest 
and demand in the Pilot Program to warrant extension for another four 
months. The Exchange believes that the Pilot Program has provided 
investors with additional means of managing their risk exposures and 
carrying out their investment objectives. The Exchange has not 
experienced any adverse market effects with respect to the Pilot 
Program.
    In the event the Exchange does not receive approval to adopt the 
Pilot Program on a permanent basis by July 31, 2014 and proposes an 
additional extension of the Pilot Program, the Exchange will submit, 
along with any filing proposing such amendments to the Pilot Program, 
an additional Pilot Program Report covering the period during which the 
Pilot Program was in effect and including the details referenced above, 
along with the nominal dollar value of the underlying security of each 
trade. The Pilot Program Report would be submitted to the Commission at 
least one month prior to the expiration date of the Pilot Program.
    The Exchange notes that any positions established under this Pilot 
Program would not be impacted by the expiration of the Pilot Program. 
For example, a 10-contract FLEX Equity Option opening position that 
overlies less than $1 million in the underlying security and expires in 
January 2016 could be established during the Pilot Program. If the 
Pilot Program were not extended or adopted on a permanent basis, the 
position would continue to exist and any further trading in the series 
would be subject to the minimum value size requirements for continued 
trading in that series.
    The Exchange believes that the Pilot Program has been successful 
and well-received by its membership and the investing public for the 
period that it has been in operation as a Pilot Program.\8\
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    \8\ The Pilot Program was initiated on May 12, 2010. See 
Securities Exchange Act Release No. 62084 (May 12, 2010), 75 FR 
28091 (May 19, 2010) (SR-NYSEAmex-2010-40).
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\9\

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in general, and furthers the objectives of Section 6(b)(5),\10\ in 
particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. Specifically, the Exchange 
believes that the proposed extension of the Pilot Program, which 
eliminates the minimum value size applicable to opening transactions in 
new series of FLEX Options, would provide greater opportunities for 
investors to manage risk through the use of FLEX Options. Further, the 
Exchange notes that it has not experienced any adverse effects from the 
operation of the Pilot Program. The Exchange further notes that 
extending the Pilot Program for an additional four months will remove 
impediments to and perfect the mechanism of a free and open market 
because it will enable the Pilot Program to continue uninterrupted 
pending review of the Exchange's rule proposal to adopt the Pilot 
Program on a permanent basis.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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. The proposed change is being 
made to extend the operation of the Pilot Program to allow adequate 
time for the Commission to consider the Exchange's proposal to 
permanently adopt the elimination of the existing minimum value size 
applicable to opening transactions in new FLEX series. Other competing 
options exchanges have rules that do not impose minimum value size 
requirements for opening transactions in new FLEX series.\11\ Thus, the 
proposed changes will not impose any burden on competition while 
providing that the elimination of the minimum value size requirements 
for opening transactions in new FLEX series continues without 
interruption until such time that permanent approval is granted by the 
Commission.
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    \11\ See Chicago Board Options Exchange Rule 24A.4.
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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 \12\ and Rule 19b-4(f)(6) thereunder.\13\ 
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 prior to 
30 days from the date on which it was filed, 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 \14\ and Rule 19b-
4(f)(6) thereunder.\15\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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, 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 Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Commission notes that 
waiving the 30-day operative delay would allow the Pilot Program to 
continue without interruption while the Commission considers the 
Exchange's proposal to permanently adopt the Pilot Program, and 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest.\18\ Therefore, the 
Commission hereby waives the 30-day operative delay and designates the 
proposal operative upon filing.
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ 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. 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 under 
Section 19(b)(2)(B) of the Act \19\ to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 15 U.S.C. 78s(b)(2)(B).
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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 email to rule-comments@sec.gov. Please include 
File Number SR-NYSEMKT-2014-26 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-2014-26. 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

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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-2014-26 and should be submitted on or before 
April 28, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-07641 Filed 4-4-14; 8:45 am]
BILLING CODE 8011-01-P


