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Notice

Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by NYSE Amex LLC Establishing Strike Price Intervals of $1 and Increasing Position and Exercise Limits With Respect to Options on the KBW Bank Index

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Start Preamble December 15, 2010.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) [1] and Rule 19b-4 thereunder,[2] notice is hereby given that, on December 14, 2010, NYSE Amex LLC (the “Exchange” or “NYSE Amex”) 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 Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange proposes to amend NYSE Amex Rules 903C and 904C with respect to options on the KBW Bank Index (“BKX” or “Index”) to (i) establish strike price intervals of $1.00 and (ii) increase the position and exercise limits applicable thereto. The text of the proposed rule change is available at the Exchange's principal office, on the Commission's Web site at http://www.sec.gov, at the Commission's Public Reference Room, and http://www.nyse.com.

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

In its filing with the Commission, the 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 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 purpose of the proposed rule change is to amend NYSE Amex Rules 903C and 904C with respect to options on BKX to (i) establish strike price intervals of $1.00 and (ii) increase the position and exercise limits applicable thereto. The proposed change would provide investors with greater flexibility with respect to trading options on BKX, which the Exchange intends on listing pursuant to the generic listing standards of Amex Rule 903C, by allowing them to establish positions that are better tailored to meet their investment objectives.Start Printed Page 80098

$1 Strike Price Intervals

The Exchange proposes to list series of BKX at $1.00 or greater strike price intervals, if the strike price is less than $200, and to list at least two strike prices above and two strike prices below the current value of the Index at about the time a series is opened for trading on the Exchange.[3]

As proposed, additional series of BKX could be opened for trading on the Exchange when the Exchange deems it necessary to maintain an orderly market, to meet customer demand, or when the underlying Index moves substantially from the initial exercise price or prices. To the extent that any additional strike prices are listed by the Exchange, such additional strike prices would be within thirty percent (30%) above or below the closing value of the Index on the prior day. The Exchange could also open additional strike prices that are more than 30% above or below the current Index value provided that demonstrated customer interest exists for such series, as expressed by institutional, corporate, or individual customers or their brokers. Market Makers trading for their own account would not be considered when determining customer interest under this provision. In addition to the initial listed series, the Exchange could list up to sixty (60) additional series per expiration month for each series on BKX. In all cases, however, $1.00 strike price intervals could be listed on BKX only where the strike price is less than $200.

As proposed, the Exchange could not list Long-Term Equity AnticiPation Securities (“LEAPS”) on BKX at intervals less than $2.50.

The Exchange also proposes an additional delisting policy for BKX, whereby the Exchange would regularly review series that are outside a range of five (5) strikes above and five (5) strikes below the current value of BKX, and would be able to delist series with no open interest in both the put and the call series having a: (a) strike higher than the highest strike price with open interest in the put and/or call series for a given expiration month, and (b) strike lower than the lowest strike price with open interest in the put and/or call series for a given expiration month.

The Exchange proposes that, notwithstanding the above delisting policy, customer requests to add strikes and/or maintain strikes in BKX eligible for delisting could be granted.

Accordingly, the Exchange proposes to include these proposed changes as new Commentary .07 to NYSE Amex Rule 903C.

With regard to the impact on system capacity, the Exchange has analyzed its capacity and represents that it and the Options Price Reporting Authority have the necessary systems capacity to handle the additional traffic associated with the listing and trading of an expanded number of series as proposed herein.

Position and Exercise Limits

Under NYSE Amex Rule 904C(c), the highest position and exercise limit that a stock index industry group option such as BKX is permitted to have is 31,500 contracts. However, several other options exchanges currently list options on BKX and have expanded their position and exercise limit for options on BKX to 44,000 contracts.[4] The Exchange believes that it is important for a product like BKX, which is traded on multiple exchanges, to have uniform position and exercise limits in order to eliminate any confusion among investors and other market participants. Accordingly, the Exchange proposes to amend NYSE Amex Rule 904C(c) to similarly increase the position and exercise limits for options on BKX to 44,000 contracts.[5]

The Exchange also proposes a non-substantive change to move the reference to the Pauzeé Tombstone Common Stock Index, and the position limit applicable thereto, to a more appropriate location within NYSE Amex Rule 904C(c).

2. Statutory Basis

The Exchange believes that its proposal is consistent with Section 6(b) of the Act,[6] in general, and furthers the objectives of Section 6(b)(5) of the Act,[7] 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 general, to protect investors and the public interest. Specifically, the changes proposed herein would provide investors with greater flexibility to establish positions that are better tailored to meet their investment objectives while also eliminating potential confusion by aligning the Exchange's position and exercise limits with that of other options exchanges.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others

No written comments were solicited or received with respect to the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

Because the foregoing proposed rule change does not significantly affect the protection of investors or the public interest, does not impose any significant burden on competition, and, by its terms, does not become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act [8] and Rule 19b-4(f)(6) thereunder.[9]

The Exchange has requested that the Commission waive the 30-day operative delay. The Commission believes that waiver of the operative delay is consistent with the protection of investors and the public interest because the proposal is substantially similar to that of another exchange that has been approved by the Commission.[10] Therefore, the Start Printed Page 80099Commission designates the proposal operative upon filing.[11]

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.

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

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-NYSEAmex-2010-120. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/​rules/​sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of 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-NYSEAmex-2010-120 and should be submitted on or before January 11, 2011.

Start Signature

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.[12]

Florence E. Harmon,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  The Exchange notes that similar proposals to list series of BKX at $1.00 or greater strike price intervals have been previously approved by the Commission. See Securities Exchange Act Release No. 60840 (October 20, 2009), 74 FR 55593 (October 28, 2009) (SR-Phlx-2009-77). See also Securities Exchange Act Release No. 60896 (October 28, 2009), 74 FR 56906 (November 3, 2009) (SR-NYSEArca-2009-98).

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4.  See Securities Exchange Act Release No. 49312 (February 24, 2004), 69 FR 9672 (March 1, 2004) (SR-Phlx-2004-13). See also Securities Exchange Act Release No. 55932 (June 20, 2007), 72 FR 35288 (June 27, 2007) (SR-NYSEArca-2007-54).

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5.  The Exchange notes that, as provided under NYSE Amex Rule 905C(ii), the amount of stock index industry group options contracts that can be exercised pursuant to NYSE Amex Rule 905C is the same number of contracts established pursuant to NYSE Amex Rule 904C as the position limit for such options, and thus does not require that the text of NYSE Amex Rule 905C be amended to effect the change proposed herein.

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9.  17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 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.

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10.  See supra notes 3 and 4.

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11.  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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[FR Doc. 2010-31949 Filed 12-20-10; 8:45 am]

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