[Federal Register Volume 78, Number 180 (Tuesday, September 17, 2013)]
[Notices]
[Pages 57198-57203]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-22513]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70373; File No. SR-NYSEMKT-2013-73]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed Rule Change To Amend Certain of Its
Rules Pertaining to the Trading of Options in Order To Change the
Expiration Date for Most Option Contracts to the Third Friday of the
Expiration Month Instead of the Saturday Following the Third Friday
September 11, 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 September 5, 2013, NYSE MKT LLC (``NYSE MKT'' or ``Exchange'')
filed with the Securities and Exchange Commission (``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\ 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 certain of its rules pertaining to
the trading of options in order to change the expiration date for most
option contracts to the third Friday of the expiration month instead of
the Saturday following the third Friday. 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 proposes to amend certain of its rules pertaining to
the trading of options in order to change the expiration date for most
option contracts to the third Friday of the expiration month instead of
the Saturday following the third Friday. This proposed rule change is
based on a recent proposal of The Options Clearing Corporation
(``OCC'') and is designed to conform the Exchange's rules to the
changes implemented by the OCC.\3\ As discussed in greater detail
below, during a transition period that began on June 21, 2013,
expiration processing will be conducted on Friday, although
supplementary exercises could still be submitted prior to the Saturday
expiration time. Saturday expirations will be eliminated for all option
contracts expiring on or after February 1, 2015, with a limited
exception for certain ``grandfathered'' contracts.
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\3\ See Securities Exchange Act Release No. 69772 (June 17,
2013), 78 FR 37645 (June 21, 2013) (SR-OCC-2013-04).
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Most option contracts (``monthly expiration contracts'') currently
expire at the ``expiration time'' (11:59 p.m. Eastern Time (``ET'')) on
the Saturday following the third Friday of the specified expiration
month (the ``expiration date'').\4\ As a result of this proposed rule
change, the expiration date for monthly expiration contracts would be
changed to the third Friday of the expiration month. The expiration
time would continue to be 11:59 p.m. ET on the expiration date. The
proposed rule change would apply only to monthly expiration contracts
expiring after February 1, 2015, and, in this regard, the Exchange does
not propose to change the expiration date for any outstanding option
contract.
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\4\ See, e.g., the definition of ``expiration time'' in Article
I of the OCC By-Laws.
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The proposed rule change would apply only to series of option
contracts opened for trading after the effective date of this proposed
rule change and having expiration dates later than February 1, 2015.
Option contracts having non-monthly expiration dates (``non-monthly
expiration contracts'') would be unaffected by this proposed rule
change except that flexibly structured (``FLEX'') options having
expiration dates later than February 1, 2015 could not expire on a
Saturday unless they are specified by the OCC as grandfathered. Non-
monthly expiration contracts are discussed further below.
In order to provide a smooth transition to the proposed Friday
expiration, the Exchange, together with other option exchanges and the
OCC, began moving the expiration exercise procedures to Friday for all
monthly expiration contracts on June 21, 2013, even though the
contracts will continue to expire on Saturday. After February 1, 2015,
virtually all monthly expiration contracts would actually expire on
Friday. The only monthly expiration contracts that would expire on a
Saturday after February 1, 2015 would be certain options that were
listed prior to the effectiveness of the OCC's proposal, and a limited
number of options that may be listed prior to necessary systems changes
of the Exchange and the other options exchanges, which are expected to
be completed in August 2013. The Exchange, along with other option
exchanges, has agreed that, once these systems changes are made, it
will not list any additional options with Saturday expiration dates
falling after February 1, 2015.
Background
Saturday was established as the monthly expiration date for OCC-
cleared options primarily in order to allow sufficient time for
processing of option exercises, including correction of errors, while
the markets were closed and positions remained fixed. However,
improvements in technology and long experience have rendered Saturday
expiration processing inefficient. Indeed, many non-monthly expiration
contracts are currently traded with business day expiration dates.
These
[[Page 57199]]
include FLEX options and quarterly, monthly, and weekly options.
Expiration exercise processing for these non-monthly expiration
contracts occurs on a more compressed timeframe and with somewhat
different procedures than Saturday expiration processing for monthly
expiration contracts.
It has been a long-term goal of OCC and its clearing members to
move the expiration process for all monthly expiration contracts from
Saturday to Friday night. Eliminating Saturday expirations will allow
OCC to streamline the expiration process for all monthly expiration
contracts and increase operational efficiencies for OCC and its
clearing members. Furthermore, it will compress the operational
timeframe for processing the options expirations such that clearing
members will be required to reconcile options trades on the trade date,
which will enhance intra-day risk management of cleared trades by the
clearing member and promote real-time trade date reconciliation and
position balancing by clearing members.
Industry groups, clearing members and the option exchanges have
been active participants in planning for the transition to the Friday
expiration. In March 2012, OCC began to discuss moving monthly
expiration contracts to Friday expiration dates with industry groups,
including two Securities Industry and Financial Markets Association
(``SIFMA'') committees, the Operations and Technology Steering
Committee and the Options Committee, and at two major industry
conferences, the SIFMA Operations Conference and the Options Industry
Conference. OCC also discussed the project with the Intermarket
Surveillance Group and at an OCC Operations Roundtable. In each case,
the initiative received broad support.
Friday expiration processing is also consistent with the long-
standing rules and procedures of the options exchanges and the
Financial Industry Regulatory Authority (``FINRA''), which generally
provide that exercise decisions with respect to expiring monthly
expiration contracts must be made by, and exercise instructions may not
be accepted from customers after, 5:30 p.m. ET on the business day
preceding expiration (usually Friday).\5\ Brokerage firms may set
earlier cutoff times for customers submitting exercise notices.
Clearing members of OCC are permitted to submit exercise instructions
after the cutoff time (``supplementary exercises'') only in case of
errors or other unusual situations, and may be subject to fines or
disciplinary actions.\6\ The Exchange believes that the extended period
between cutoff time and expiration of options is no longer necessary
given modern technology.
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\5\ See, e.g., FINRA Rule 2360(b)(23)(A)(iii), which provides
that ``[o]ption holders have until 5:30 p.m. Eastern Time (`ET') on
the business day immediately prior to the expiration date to make a
final exercise decision to exercise or not exercise an expiring
option. Members may not accept exercise instructions for customer or
noncustomer accounts after 5:30 p.m. ET.''
\6\ See OCC Rule 805(g).
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Transition Period
Based on significant dialogue between the Exchange, other option
exchanges, the OCC and its clearing members regarding the move to
Friday expiration, the Exchange believes that the adoption of Friday
expiration for monthly expiration contracts is best accomplished
through an appropriate transition period, during which processing
activity for all options, whether expiring on Friday or Saturday, has
moved to Friday, followed by a change in the expiration day for new
series of options. In May 2012, it was determined that Friday, June 21,
2013, would be an appropriate date on which to move expiration
processing from Saturday to Friday night.
Accordingly, and based on the OCC's related proposal, beginning
June 21, 2013, Friday expiration processing is in effect for all
expiring monthly expiration contracts, regardless of whether the
contract's actual expiration date is Friday or Saturday. However, for
contracts having a Saturday expiration date, exercise requests received
after Friday expiration processing is complete, but before the Saturday
contract expiration time, will continue to be processed, without fines
or penalties, so long as they are submitted in accordance with OCC's
procedures governing such requests. After the transition period and the
expiration of all existing Saturday-expiring options, expiration
processing would be a single operational process and would run on
Friday night for all monthly expiration contracts.
Friday Expiration Processing Schedule
Previously, expiration processing for monthly expiration contracts
began on Saturday morning at 6:00 a.m. Central Time (``CT'') and was
completed at approximately noon CT when margin and settlement reports
are available. The window for submission of instructions in accordance
with OCC's exercise-by-exception procedures under OCC Rule 805(d) was
open from 6:00 a.m. to 9:00 a.m. CT on Saturday morning.\7\ As proposed
by OCC, the window for submission of exercise-by-exception instructions
is now open from 6:00 p.m. to 9:15 p.m. CT on Friday evening.\8\ Friday
expiration processing for monthly expiration contracts therefore now
begins at 6:00 p.m. CT on Friday evening and ends at approximately 2:00
a.m. CT on Saturday morning when margin and settlement reports would be
available.\9\
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\7\ OCC's exercise-by-exception procedures are described in OCC
Rule 805(d), which generally provides that each clearing member will
automatically be deemed to have submitted an exercise notice
immediately prior to the expiration time for all in-the-money option
contracts unless the clearing member has instructed OCC otherwise in
a written exercise notice.
\8\ See supra note 4. The exercise-by-exception window for
weekly and quarterly expiration options is from 6:00 p.m. to 7:00
p.m. CT.
\9\ The new expiration schedule for Friday expiration processing
is similar to the expiration schedule for weekly options, which
begins at 6:00 p.m. CT on Friday evening and ends at 11:30 p.m. CT
on Friday evening. All timeframes would be set forth in OCC's
procedures and subject to change based on OCC's experience with
Friday expiration processing.
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Exercises for monthly expiration contracts with Saturday
expirations must be allowed under the terms of the contracts. However,
in order to accommodate the proposed new expiration schedule, the OCC
also proposed to shorten the period of time in which clearing members
may submit a supplementary exercise notice under OCC Rule 805(b). In
addition, OCC amended Rule 801 to eliminate the ability of clearing
members to revoke or modify exercise notices submitted to OCC. This
change, along with the change in the processing timeline discussed
above, more closely aligns OCC's expiration processing procedures with
self-regulatory organization rules, including those of the Exchange,
under which exchange members must submit exercise instructions by 5:30
p.m. ET on Friday and may not accept exercise instructions from
customers after 5:30 p.m. ET on Friday. Accordingly, this change does
not represent a departure from current practices for clearing members
or their customers.
Grandfathering of Certain Options Series
Certain option contracts have already been listed on participant
exchanges, including the Exchange, with Saturday expiration dates as
distant as December 2016. Additionally, until participant exchanges,
including the Exchange, complete certain systems enhancements in August
2013, it is possible that additional option contracts may be listed
with Saturday expiration dates
[[Page 57200]]
beyond February 1, 2015. For these contracts, transitioning to a Friday
expiration for newly-listed option contracts expiring after February 1,
2015 would create a situation under which certain option open interest
would expire on a Saturday while other option open interest would
expire on a Friday in the same expiration month. OCC clearing members
have expressed a clear preference to not have a mix of option open
interest in any particular month. Accordingly, the Exchange and other
option exchanges have agreed not to permit the listing of, and OCC will
not accept for clearance, any new option contracts with a Friday
expiration if existing option contracts of the same series expire on
the Saturday following the third Friday of the same month. However,
Friday expiration processing will be in effect for these Saturday
expiration contracts. As with monthly expiration contracts during the
transition period, exercise requests received after Friday expiration
processing is complete, but before the Saturday contract expiration
time, will continue to be processed without fines or penalties.
Proposed Amendments to the Exchange's Rules
In order to implement the change to Friday expiration processing
and eventual transition to Friday expiration for all monthly expiration
contracts, the Exchange proposes to amend certain of its rules, as
described below. The Exchange is also proposing, with this filing, to
replace any historic reference in the purpose section of any past
Exchange rule filings or previously released circulars, notices or
bulletins to any expiration date other than Friday for a monthly
expiration contract with the new Friday standard.
First, the Exchange proposes to amend Rule 903 (Series of Options
Open for Trading) to differentiate between Friday and Saturday
expirations. Specifically, the Exchange would specify that, on the
business day of expiration (i.e., for Friday expirations), or, in the
case of an option contract expiring on a day that is not a business
day, and as is currently the case for Saturday expirations, on the
business day prior to the expiration date of particular series of
options, a closing rotation for such series shall commence. The
Exchange also proposes to amend Commentary .04 to Rule 903 to specify
that, due to unusual market conditions, the Exchange, in its
discretion, may add new series of options on an individual stock or
Exchange-Traded Fund Share until the close of trading on the business
day prior to the business day of expiration (i.e., Thursday for a
Friday expiration), or, in the case of an option contract expiring on a
day that is not a business day, and as is currently the case for
Saturday expirations, until the close of trading on the second business
day prior to expiration (i.e., until the close of trading on Thursday
for Saturday expirations).
Second, the Exchange proposes to amend Rule 909 (Other Restrictions
on Exchange Option Transactions and Exercises) with respect to certain
timing for restrictions on the exercise of option contracts.
Specifically, the Exchange proposes to specify that the 10-business-day
period referenced in Rule 909 includes the expiration date for an
option contract that expires on a business day.
Third, the Exchange proposes to amend Rule 980 (Exercise of Option
Contracts) in several areas, each of which is designed to differentiate
between Friday and Saturday expirations. First, the Exchange proposes
to specify in Rule 980(b) that special procedures apply to the exercise
of equity options on the business day of their expiration (i.e., for
Friday expirations), or, in the case of an option contract expiring on
a day that is not a business day, and as is currently the case for
Saturday expirations, on the last business day before their expiration.
Second, the Exchange proposes to specify in Rule 980(c) that, regarding
exercise cut-off times, option holders have until 5:30 p.m. ET on the
business day of their expiration (i.e., for Friday expirations), or, in
the case of an option contract expiring on a day that is not a business
day, and as is currently the case for Saturday expirations, on the
business day immediately prior to the expiration date. Third, the
Exchange proposes to specify in Rule 980(g) that the advance notice
described therein is applicable if provided by the Exchange on or
before 5:30 p.m. ET on the business day (i.e., on Thursday) immediately
prior to the business day of expiration (i.e., for Friday expirations),
or, in the case of an option contract expiring on a day that is not a
business day, and as is currently the case for Saturday expirations,
the business day immediately prior to the last business day before the
expiration date (i.e., Thursday for Saturday expirations). Fourth, the
Exchange proposes to amend Commentary .03 of Rule 980 to specify that
the reference therein to ``unusual circumstances'' includes, but is not
limited to, a significant news announcement concerning the underlying
security of an option contract that is scheduled to be released just
after the close on the business day the option contract expires (i.e.,
for Friday expirations), or, in the case of an option contract expiring
on a day that is not a business day, and as is currently the case for
Saturday expirations, the business day immediately prior to expiration.
Fourth, the Exchange proposes to amend Rule 903C (Series of Stock
Index Options) with respect to the permissible time for trading.
Specifically, the Exchange proposes to specify in Rule 903C(c) that, on
the business day a particular series of index options expires (i.e.,
for Friday expirations), or, in the case of an option contract expiring
on a day that is not a business day, and as is currently the case for
Saturday expirations, the business day prior to the expiration of a
particular series of index options, such options shall freely trade
until 4:00 p.m., unless the Board of Directors has established
different hours of trading for certain index options. Additionally, the
Exchange proposes to specify in Commentary .01 to Rule 903C that
transactions in Major Market Index options may be effected on the
Exchange until 4:15 p.m. each business day, including the business day
the option contract expires (i.e., for Friday expirations), or, in the
case of an option contract expiring on a day that is not a business
day, and as is currently the case for Saturday expirations, the
business day prior to expiration.
Fifth, the Exchange proposes to amend Rule 909C (Other Restrictions
on Stock Option Transactions and Exercises) with respect to certain
timing for restrictions on the exercise of option contracts.
Specifically, the Exchange proposes to specify that all of the
provisions of Rule 909 shall be applicable to stock index options,
except that (a) any restriction on the exercise of a particular series
of stock index options imposed by the Exchange may remain in effect
until (but not including) the business day the option contract expires
(i.e., for Friday expirations), or, in the case of an option contract
expiring on a day that is not a business day, and as is currently the
case for Saturday expirations, the business day prior to the expiration
date of such series of options.
Sixth, the Exchange proposes to amend Rule 980C (Exercise of Stock
Index Option Contracts) with respect to certain procedures related to
the exercise of stock index option contracts. Specifically, the
Exchange proposes to specify in Rule 980C(b) that the provisions of
subparagraphs (i) and (ii) of paragraph (a) of Rule 980C are not
applicable with respect to any series of stock index options on the
business day
[[Page 57201]]
of their expiration (i.e., for Friday expirations), or, in the case of
an option contract expiring on a day that is not a business day, and as
is currently the case for Saturday expirations, on the business day
prior to the expiration date of such series of options.\10\
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\10\ Subparagraphs (i) of paragraph (a) of Rule 980C provides
that a memorandum to exercise any American-style stock index option
contract issued or to be issued in a customer, market maker or firm
account at the OCC must be received or prepared by the member
organization no later than five (5) minutes after the close of
trading on that day and must be time stamped at the time it is
received or prepared. Subparagraphs (ii) of paragraph (a) of Rule
980C provides that any member or member organization that intends to
submit an exercise notice for 25 or more American-style stock index
option contracts in the same series on the same business day on its
own behalf or on behalf of an individual customer must deliver an
``exercise advice'' on a form prescribed by the Exchange to a place
designated by the Exchange no later than five (5) minutes after the
close of trading on that day.
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Seventh, the Exchange proposes to amend Rule 900FRO (Applicability;
Definitions) with respect to fixed return options (``FROs'') in order
to differentiate between Friday and Saturday expirations with respect
to the definitions of ``VWAP'' and ``Settlement Price.'' Specifically,
the Exchange proposes to specify in Rule 900FRO(b)(4) that the
denominator in the equation for determining Volume Weighted Average
Price or ``VWAP'' is the total number of shares traded during the
entire last day of trading on the business day of their expiration
(i.e., for Friday expirations), or, in the case of an option contract
expiring on a day that is not a business day, and as is currently the
case for Saturday expirations, on the business day prior to expiration.
Additionally, the Exchange proposes to specify in Rule 900FRO(b)(5)
that the term ``settlement price'' means the ``all-day'' VWAP of the
composite prices of the security underlying the FRO during regular
trading hours on the business day of their expiration (i.e., for Friday
expirations), or, in the case of an option contract expiring on a day
that is not a business day, and as is currently the case for Saturday
expirations, on the last trading day prior to expiration.
Eighth, the Exchange proposes to amend Rule 910FRO (Determination
of the Settlement Price) to differentiate between Friday and Saturday
expirations. Specifically, the Exchange proposes to specify in Rule
910FRO(a) that, for FROs based on individual stocks and Exchange-Traded
Fund Shares, the Exchange will use the ``composite price'' VWAP during
regular trading hours for the entire business day of their expiration
(i.e., for Friday expirations), or, in the case of an option contract
expiring on a day that is not a business day, and as is currently the
case for Saturday expirations, the entire business day immediately
preceding the expiration date as reported by industry price vendors.
Ninth, the Exchange proposes to amend Rule 958FRO (Maximum Bid-Ask
Differentials) to differentiate between Friday and Saturday
expirations. Specifically, the Exchange proposes to specify that a
specialist or registered trader is expected to bid and offer so as to
create differences of no more than $0.25 between the bid and the offer
for each FRO contract except during the business day of their
expiration (i.e., for Friday expirations), or, in the case of an option
contract expiring on a day that is not a business day, and as is
currently the case for Saturday expirations, during the business day
prior to expiration, where the maximum permissible price differential
for FROs may be $0.50.
Tenth, the Exchange proposes to amend Rule 952BIN (Maximum Bid-Ask
Differentials) to differentiate between Friday and Saturday
expirations. Specifically, the Exchange proposes to specify that a
specialist or registered trader is expected to bid and offer so as to
create differences of no more than 25% of the designated exercise
settlement value between the bid and offer for each binary option
contract or $5.00, whichever amount is wider, except during the
business day of their expiration (i.e., for Friday expirations), or, in
the case of an option contract expiring on a day that is not a business
day, and as is currently the case for Saturday expirations, during the
business day prior to the expiration, on which the maximum permissible
price differential for binary options may be 50% of the designated
exercise settlement value or $5.00, whichever amount is wider.
Eleventh, the Exchange proposes to amend Rule 900.2NY (Definitions)
in order to amend the definition of ``Expiration Date.'' The proposed
amendment would add text to differentiate between option contracts that
expire on a non-business day, as is currently the case with monthly
expiration contracts, and option contracts that expire on a business
day, as would be the case under the proposed new timing of expiration
(i.e., Friday instead of Saturday). The amended definition would
include a reference to the February 1, 2015 transition date, after
which virtually all monthly expiration contracts would actually expire
on Friday (rather than, beginning June 21, 2013, only being processed
on Friday). The amended definition would also include a reference to
long-term option contracts expiring on or after February 1, 2015 that
the OCC may designate as ``grandfathered,'' for which the expiration
date would continue to be the Saturday immediately following the third
Friday of the expiration month.
Twelfth, the Exchange proposes to amend Rule 953NY (Trading Halts
and Suspensions) to differentiate between Friday and Saturday
expirations. Specifically, the Exchange proposes to specify in Rule
953NY(d)(7) that, in the event that any of the events described in Rule
953NY(d)(1)--(6) should occur on the business day of expiration (i.e.,
for Friday expirations), or, in the case of an option contract expiring
on a day that is not a business day, and as is currently the case for
Saturday expirations, on the business day prior to expiration, it is
the preference of the Exchange to allow trading to continue on that
date.
Finally, the Exchange proposes to amend Rule 975NY (Obvious Errors
and Catastrophic Errors) to add greater specificity regarding the
timing surrounding notifying the Exchange of a ``Catastrophic Error.''
Specifically, the Exchange proposes to specify that, for such
transactions in an expiring options series that take place on an
expiration day that is a business day (i.e., for Friday expirations),
an ATP Holder must notify the Exchange by 5:00 p.m. ET that same day.
For such transactions in an options series that take place on the
business day immediately prior to an expiration day that is not a
business day (i.e., for Saturday expirations), an ATP Holder must
notify the Exchange by 5:00 p.m. ET on such business day (i.e., on
Friday).
The Exchange notes that the proposed rule change is not otherwise
intended to address any other issues, and the Exchange is not aware of
any problems that ATP Holders would have in complying with the proposed
rule change.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\11\ in general, and
Section 6(b)(5) of the Act,\12\ in particular. The proposed rule change
is consistent with Section 6(b)(5) of the Act 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
[[Page 57202]]
impediments to and perfect the mechanism of a free and open market and
a national market system.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that implementing the change to Friday
expiration processing and eventually transitioning to Friday expiration
for all monthly expiration contracts would foster cooperation and
coordination with persons engaged in facilitating transactions in
securities. Specifically, and as noted above, it has been a long-term
goal of OCC and its clearing members to move the expiration process for
all monthly expiration contracts from Saturday to Friday night.
Eliminating Saturday expirations would allow OCC to streamline the
expiration process for all monthly expiration contracts and increase
operational efficiencies for OCC and its clearing members.
The Exchange further believes that the proposed rule change would
remove impediments to and perfect the mechanism of a free and open
market and a national market system by compressing the operational
timeframe for processing the options expirations, such that OCC
clearing members would be required to reconcile options trades on the
trade date, which would enhance intra-day risk management of cleared
trades by the clearing member and promote real-time trade date
reconciliation and position balancing by clearing members.
The Exchange further believes that the proposed rule change is
consistent with the Act because the extended period between cutoff time
and expiration of options is no longer necessary given modern
technology. In this regard, and based on significant dialogue between
the Exchange, other option exchanges, the OCC and its clearing members
regarding the move to Friday expiration, the Exchange believes that the
adoption of Friday expiration for monthly expiration contracts is best
accomplished through an appropriate transition period during which
processing activity for all options, whether expiring on Friday or
Saturday, has moved to Friday, followed by a change in the expiration
day for new series of options.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\13\ 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 rule change is not designed to
address any aspect of competition, whether between the Exchange and its
competitors, or among market participants. Instead, the proposed rule
change is designed to allow OCC to streamline the expiration process
for all monthly expiration contracts and increase operational
efficiencies for OCC and its clearing members. The proposed rule change
also will allow OCC and its clearing members to reduce operational
risk. Moreover, OCC has coordinated moving to a Friday night expiration
process with options industry participants, including the Exchange, and
has also obtained assurance from all such participants that they are
able to adhere to OCC's Friday night expiration implementation
schedule. Therefore, the Exchange does not believe the proposed rule
change would impose a burden on competition.
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\13\ 15 U.S.C. 78f(b)(8).
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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 \14\ and Rule 19b-4(f)(6) thereunder.\15\
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 and Rule 19b-
4(f)(6)(iii) thereunder.\16\
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\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires the Exchange to give the Commission written notice of the
Exchange's 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.
\16\ 17 CFR 240.19b-4(f)(6)(iii).
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A proposed rule change filed under Rule 19b-4(f)(6)\17\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b4(f)(6)(iii),\18\ 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
waiver of the operative delay would permit the Exchange to implement
the changes proposed herein immediately.
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\17\ 17 CFR 240.19b-4(f)(6).
\18\ 17 CFR 240.19b-4(f)(6)(iii).
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Under the proposal, the Exchange would amend certain of its rules
pertaining to the trading of options in order to change the expiration
date for most option contracts to the third Friday of the expiration
month instead of the Saturday following the third Friday. The Exchange
represents that a waiver of the 30-day operative delay is necessary and
appropriate to not disrupt the industry scheduled listing of Long Term
Equity Options Series (``LEAPS'') expiring in January 2016.
Specifically, the Exchange notes that, pursuant to the Options Listing
Procedures Plan (an approved national market system plan) and its Rule
903 Commentary .03(b), the Options Clearing Corporation and all
national securities exchanges that trade options, including the
Exchange, agreed on adding new LEAPS expiring in January 2016 on
September 16, 2013, for those issues that are on the January expiration
cycle. The Exchange further represents that this date was published in
2012 and has been relied upon across the industry.
Since the Exchange's Rule 900.2NY (26) currently defines
``expiration date'' as the ``Saturday immediately following the third
Friday of the expiration month,'' the Exchange will not be able to list
monthly option contracts expiring on any day other than a Saturday
until this proposal becomes effective. As such, the Exchange represents
that it will be at a significant competitive disadvantage, and it
requests the waiver to facilitate and coordinate with the listing of
the 2016 LEAPS on September 16, 2013. Additionally, the Exchange notes
that no other provision of the proposal will have an immediate impact
on market participants because no monthly options expiring in the next
30 days have a Friday expiration date. Based on the Exchange
representations above, and since the proposal is based, in part, on a
proposal submitted by the OCC and approved by the Commission,\19\ the
Commission waives the 30-day operative delay requirement
[[Page 57203]]
and designates the proposed rule change as operative upon filing.\20\
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\19\ See supra note 4.
\20\ 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 such 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) \21\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\21\ 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 [email protected]. Please include
File Number SR-NYSEMKT-2013-73 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-NYSEMKT-2013-73. 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 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 publicly available. All
submissions should refer to File Number SR-NYSEMKT-2013-73 and should
be submitted on or before October 8, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority. \22\
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\22\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-22513 Filed 9-16-13; 8:45 am]
BILLING CODE 8011-01-P