DATE:



May 23, 2012

Executive Summary

As part of our participation in the Penny Pilot Program (“Pilot”), NYSE Arca Inc. (“NYSE Arca” or “Exchange”) has committed to providing the Securities and Exchange Commission (“Commission” or “SEC”) several reports analyzing the impact of the Pilot. The reports are designed to better understand the impact of reducing the minimum price variations (“MPVs”) for quoting and trading options and should serve as the basis for determining how to proceed in extending the Pilot. This will be the ninth report on the Pilot to date and will cover the period October 2011 to April 2012.

Based on our observations, since the Pilot began, the NBBO spread has narrowed, size available at the NBBO has declined, quote traffic has increased and industry volumes have increased.

Methodology

Based on the request of SEC staff, the Pilot stocks were broken into 3 groups for analysis. One group consists of the 10 least active securities of the original 63 added to the Pilot to be used as a Control Group. A second group consists of the 10 most active securities added to the Pilot. The last group consists of the 20 least active securities added to the Pilot. The mean or average results for each group were then used to make observations over time about the behavior of each group.

Outbound Quotes To OPRA From NYSE Amex

During this phase of the Pilot, outbound quotes to OPRA declined consistent with a decline in overall industry volume and activity. The largest decrease in absolute terms came from the group consisting of the 10 most active securities that saw the average daily number of quotes sent to OPRA decline from 5,390,521 quotes per day on average in October 2011 to a low of 2,152,612 quotes per day on average in January 2012, before a small rebound to 3,696,929 quotes per day in April 2012. By contrast the Control Group decreased from 397,299 to a low if 171,636 during the time period before rebounding to 180,051. The least active group actually experienced the greatest decrease in quote traffic in percentage terms from 120,301 to 36,680 quotes per day on average over the course of the period, a drop of 69.5%.

The steep decline in outbound quotes is largely attributable to the large decline in overall industry activity during the reporting period, especially in the Most Active classes.

The following chart allows for a closer examination. Further quote data is attached as Exhibit A.

[pic]

Observations On Size At The NBBO

During this phase of the Pilot, the average size at the NBBO for the 10 most active securities recovered from the 27 contract low for the prior reporting to the 38 to 46 range, although not as high as seen in many months of the prior period. By contrast, the Control Group average size at the NBBO ranged from 18 contracts to 14 contracts available at the NBBO, a continued decline in available size.. The group consisting of the 20 least active securities saw average size at the NBBO range was consistent at either 17 or 18 contracts over the period.

The following chart allows for a closer examination. Further size data is attached as Exhibit A.

[pic]

Observations About The NBBO Bid/Ask Spread Width

During this phase of the Pilot, the average NBBO bid/ask spread width for the group consisting of the 10 most active securities stayed in a relatively narrow ranged from $.24 to $.31. For the Control Group, the average bid/ask spread ranged in a similar manner (albeit slightly more variable) from $.21 to $.37 per contract. The group consisting of the least active securities saw the average NBBO spread range from $.61to $1.19. The ranges reflect a decrease in volatility in the market place following very volatile periods in August and September 2011, along with a correlation to industry volume.

The following chart allows for a closer examination. Further spread data is attached as Exhibit A.

[pic]

Observations On Industry Average Daily Volumes (“ADV”)

The group consisting of the 10 most active securities saw continued decline in Industry ADV during this phase of the Pilot with volumes ranging from 714,349 contracts daily to 477,011 contracts daily. During the same period, the Control Group saw volume range from 14,479 to 7,560 contracts on average. The group consisting of the least active securities declined from 1,095 contracts on average (similar to 1,099 contracts on average for September 2011) to 686 contracts average daily volume in April.

The following chart allows for a closer examination. Further spread data is attached as Exhibit A.

[pic]

Observations On Liquidity Providers

As of September 2011, there were 94 registered market makers providing liquidity on NYSE Arca; at the end of April 2012 there were 96.

Observations On Internalization

The Exchange has been asked by SEC staff to provide data on internalization, to include the number of internalized trades, the percentage of ADV that internalized trades comprise and other data related to internalization. However, NYSE Arca has no mechanism to be used for internalization at this time, other than the QCC Order Type which was approved in early 2011, but has not seen any significant activity.

Furthermore, while the Exchange does have rules in place governing Directed Orders, the Exchange has not designated any options classes as eligible for Directed Orders at the is time. The Exchange, therefore, does not have data to offer any observations on the effect of the Penny Pilot on internalization.

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|US Options |

|Peter Armstrong |

|Managing Director, Options |

| |

| |

|220 Montgomery St | Suite 200 |

|San Francisco CA 94104 |

|T +1 415 393 4232 |

|parmstrong@ |

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