[Federal Register Volume 77, Number 247 (Wednesday, December 26, 2012)]
[Notices]
[Pages 76155-76156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-30891]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68461; File No. SR-NYSEArca-2012-94]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change To Amend Commentary .06 to NYSE Arca
Options Rule 6.4 To Permit the Exchange To List Additional Strike
Prices Until the Close of Trading on the Second Business Day Prior to
Monthly Expiration
December 18, 2012.
I. Introduction
On September 6, 2012, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend Commentary .06 to NYSE Arca Options Rule
6.4 to permit the Exchange to list additional strike prices until the
close of trading on the second business day prior to monthly expiration
in unusual market conditions. The proposed rule change was published
for comment in the Federal Register on September 20, 2012.\3\ On
November 1, 2012, the Commission designated a longer period to act on
the proposed rule change, until December 19, 2012.\4\ The Commission
received no comment letters on the proposal. This order approves the
proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 67863 (September 14,
2012), 77 FR 58433 (``Notice'').
\4\ Securities Exchange Act Release No. 68136, 77 FR 66896
(November 7, 2012).
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II. Description of the Proposal
The Exchange proposes to amend Commentary .06 to NYSE Arca Options
Rule 6.4 to permit the Exchange to add additional strikes until the
close of trading on the second business day prior to the expiration of
a monthly, or standard, option in the event of unusual market
conditions. NYSE Arca Options Rule 6.4 currently permits the Exchange
to open additional series of individual stock options until the first
calendar day of the month in which the option expires or until the
fifth business day prior to expiration if unusual market conditions
exist.\5\ The Exchange claims that, under its current rules, if unusual
market conditions occur anytime from five to two days prior to
expiration, then market participants are unable to obtain a contract
tailored to manage their risk.\6\ According to the Exchange, options
market participants generally prefer to focus their trading in strike
prices that immediately surround the price of the underlying
security.\7\ If, however, the price of the underlying stock moves
significantly, the Exchange argues that there may be a market need for
additional strike prices to adequately account for market participants'
risk management in a stock.\8\ Accordingly, the Exchange proposes to
permit the listing of additional strikes until the close of trading on
the second business day prior to expiration of a monthly option in
unusual market conditions.
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\5\ The Exchange may make the determination to open additional
series for trading when the Exchange deems it necessary to maintain
an orderly market, to meet customer demand, or when certain price
movements take place in the underlying market. See Notice, supra
note 3 at 58434.
\6\ See Notice, supra note 3 at 58434.
\7\ See id. at 58433.
\8\ See id. at 58434.
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The Exchange represents that the proposal does not raise any
capacity concerns on the Exchange because the proposed change presents
no material difference in impact from the current rules.\9\ The
Exchange notes that the proposed change allows for new strikes that it
would otherwise be permitted to add under existing rules either on the
fifth day prior to or immediately after expiration. The Exchange
further represents that it discussed the proposed change with the
Options Clearing Corporation (``OCC'').\10\ According to the Exchange,
the OCC represented that it is able to accommodate the proposal and
will have no operational concerns with adding new series on any day,
except the last day of trading an expiring series.\11\ The Exchange
states that, since the implementation of the fifth business day
restriction on listing additional strikes, improved communications and
the adoption of the Streamline Options Series Adds by OCC allows
notification of new strikes in real time throughout the industry.\12\
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\9\ See id. The Exchange also stated that any new strikes added
under this proposal would be added in a manner consistent with the
range limitations described in NYSE Arca Options Rule 6.4A.
\10\ See id.
\11\ See id.
\12\ See id. at 58433 n. 4.
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III. Discussion and Commission Findings
After careful review of the proposed rule change, the Commission
finds that the proposed rule change is consistent with the requirements
of the Act and the rules and regulations thereunder applicable to a
national securities exchange.\13\ Specifically, the Commission finds
that the proposal is consistent with Section 6(b)(5) of the Act,\14\
which requires, among other things, that the rules of a national
securities exchange be designed to promote just and equitable
principles of trade, to prevent fraudulent and manipulative acts, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest. The Commission notes that the
proposed change extends the timeframe during which the Exchange may
list additional series of individual stock options in unusual market
conditions. The Commission believes that the proposed change will
provide the investing public and other market participants with
additional opportunities to tailor their investment and hedging
decisions, thus allowing investors to better manage their risk exposure
with additional series.\15\
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\13\ In approving this proposed rule change, the Commission
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\14\ 15 U.S.C. 78f(b)(5).
\15\ In approving this proposal, the Commission notes that the
Exchange has stated that, although the four additional days to list
additional strike prices in the event of unusual market
circumstances may generate additional quote traffic, the Exchange
believes that any increased traffic will not become unmanageable
since the proposal remains limited to the narrow situations when an
unusual market event occurs. See Notice, supra note 3 at 58434.
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\16\ that the
[[Page 76156]]
proposed rule change (SR-NYSEArca-2012-94) be, and it hereby is,
approved.
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\16\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-30891 Filed 12-21-12; 8:45 am]
BILLING CODE 8011-01-P