[Federal Register Volume 76, Number 226 (Wednesday, November 23, 2011)]
[Notices]
[Pages 72490-72492]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-30197]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65773; File No. SR-BX-2011-075]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the BOX Rules To Expand the Short Term Option Series Program
November 17, 2011.
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 November 10, 2011, NASDAQ OMX BX, Inc. (the ``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 Exchange has designated the
proposed rule change as constituting a non-controversial rule change
under Rule 19b-4(f)(6) under the Act,\3\ which renders the proposal
effective upon filing with the Commission. 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.
\3\ 17 CFR 240.19b-4(f)(6).
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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 the Rules of the Boston Options
Exchange Group, LLC (``BOX'') to expand the Short Term Option Series
Program.
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 these 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 aspects 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 this proposed rule change is to amend Supplementary
Material .07 to Chapter IV, Section 6 (Series of Options Open for
Trading) and Supplementary Material .02 to Chapter XIV, Section 10
(Terms of Index Options Contracts) to expand the Short Term Option
Series Program (``Weeklys Program'') \4\ so that BOX may select twenty-
five option classes to participate in the Weeklys Program \5\ and list
a total of 30 Short Term Option Series (``Weekly Series'') for each
option class that participates in the Weeklys Program.
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\4\ The Exchange adopted the Weeklys Program on July 15, 2010.
See Securities Exchange Act Release No. 62505 (July 15, 2010), 75 FR
42792 (July 22, 2010) (SR-BX-2010-047).
\5\ The Exchange previously increased the total number of option
classes that may participate in the Weeklys Program from 5 to
fifteen (15). See Securities Exchange Act Release No. 64009 (March
2, 2011), 76 FR 12771 (March 8, 2011) (SR-BX-2011-014).
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The Weeklys Program is codified in Supplementary Material .07 to
Chapter IV, Section 6 and Supplementary Material .02 to Chapter XIV,
Section 10. These rules state that after an option class has been
approved for listing and trading on BOX, BOX may open for trading on
any Thursday or Friday that is a business day series of options on no
more than fifteen option classes that expire on the Friday of the
following business week that is a business day. In addition to the
fifteen-option class limitation, there is also a limitation that
[[Page 72491]]
no more than twenty series for each expiration date in those classes
that may be opened for trading.\6\ Furthermore, the strike price of
each short term option has to be fixed with approximately the same
number of strike prices being opened above and below the value of the
underlying security at about the time that the Weekly options are
initially opened for trading on BOX, and with strike prices being
within thirty percent (30%) above or below the closing price of the
underlying security from the preceding day. BOX does not propose any
changes to the Weeklys Program limitations other than to increase from
fifteen to twenty-five the number of option classes that may be opened
pursuant to the Weeklys Program and increase from 20 to 30 the number
of Weekly Series that may be opened for each class of option selected
to participate in the Weeklys Program.
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\6\ However, if BOX opens less than twenty (20) short term
options for a Short Term Option Expiration Date, additional series
may be opened for trading on BOX when the Exchange deems it
necessary to maintain an orderly market, to meet customer demand or
when the market price of the underlying security moves substantially
from the exercise price or prices of the series already opened. Any
additional strike prices listed by BOX shall be within thirty
percent (30%) above or below the current price of the underlying
security. BOX may also open additional strike prices of Short Term
Option Series that are more than 30% above or below the current
price of the underlying security 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 shall not be considered when
determining customer interest under this provision). Supplementary
Material .07 to Chapter IV, Section 6 and Supplementary Material .02
to Chapter XIV, Section 10.
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The principal reason for the proposed expansion to the number of
classes is customer demand for adding, or not removing, short term
option classes from the Weeklys Program. BOX understands that other
options exchanges, in order to not exceed the fifteen-option class
restriction, from time to time, have had to discontinue trading one
short term option class before beginning to trade other option classes
within their Weeklys Program. BOX believes this has negatively impacted
investors and traders, particularly retail public customers. BOX
understands that market participants have also requested that other
options exchanges add additional classes to the Weeklys Program. BOX
notes that the Weeklys Program has been well received by market
participants, in particular by retail investors. BOX believes a modest
increase to the number of classes that may participate in the Weeklys
Program, such as the one proposed herein, will permit the options
exchanges to meet increased customer demand and provide market
participants with the ability to hedge in a greater number of option
classes.
The principal reason for the proposed expansion to the number of
series is market demand for additional series in Weeklys Options
classes in which the maximum number of series (20) has already been
reached. Specifically, BOX has observed increased demand for more
series when market moving events, such as corporate events and large
price swings, have occurred during the life span of an affected Weeklys
Program class. Currently, in order to be able to respond to market
demand, BOX is forced to delete or delist certain series in order to
make room for more in demand series.\7\ BOX finds this method to be
problematic for two reasons.
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\7\ BOX deletes series with no open interest and delists series
with open interest if those series are open for trading on another
exchange.
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First, BOX has received requests to keep series that it intends to
delete/delist to make room for more in demand series. While market
participants may access other markets for the deleted/delisted series,
BOX would prefer that market participants trade these series at BOX.
Second, this method can lead to competitive disadvantages among
exchanges. If one exchange is actively responding to market demand by
deleting/delisting and adding series, and another exchange is the last
to list the less desirable series with open interest, this last
exchange is stuck with those series and unable to list the in demand
series (because to do so would result in more than 20 series being
listed on that exchange). As a result, the maximum number of series per
class of options that participates in the Program should be increased
to 30 so that exchanges can list the full panoply of series that other
exchange list and which the market demands.
To affect[sic] this change, the Exchange is proposing to amend the
BOX rules to limit the initial number of series that may be opened for
trading to 20 series and to limit the number of additional series that
may be opened for trading to 10 series.
With regard to the impact of this proposal on system capacity, BOX
has analyzed its capacity and represents that it and the Options Price
Reporting Authority (``OPRA'') have the necessary systems capacity to
handle the potential additional traffic associated with trading of an
expanded number of classes and series in the Weeklys Program.
BOX believes that the Weeklys Program has provided investors with
greater trading opportunities and flexibility and the ability to more
closely tailor their investment and risk management strategies and
decisions. BOX further believes this proposed rule change will provide
investors with additional short term option classes and series for
investment, trading, and risk management purposes.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Securities Exchange Act of 1934 \8\ (the
``Act'') in general, and furthers the objectives of Section 6(b)(5) of
the Act \9\ in particular, in that it is designed 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. The Exchange
believes that expanding the current short term options program will
result in a continuing benefit to investors by giving them more
flexibility to closely tailor their investment decisions and hedging
decisions in greater number of securities. The Exchange believes that
expanding the current program would provide the investing public and
other market participants increased opportunities because an expanded
program would provide market participants additional opportunities to
hedge their investment thus allowing these investors to better manage
their risk exposure. While the expansion of the Weeklys Program will
generate additional quote traffic, the Exchange does not believe that
this increased traffic will become unmanageable since the proposal
remains limited to a fixed number of classes. Further, the Exchange
does not believe that the proposed rule change will result in a
material proliferation of additional series because it is limited to a
fixed number of series per class and the Exchange does not believe that
the additional price points will result in fractured liquidity.
Moreover, the Exchange believes the proposed rule change would benefit
investors by giving them more flexibility to closely tailor their
investment decisions in a greater number of securities.
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\8\ 15 U.S.C. 78f(b).
\9\ 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 not
[[Page 72492]]
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 either solicited or received.
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 \10\ and Rule 19b-4(f)(6) thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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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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.\12\
Therefore, the Commission designates the proposal operative upon
filing.\13\
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\12\ See Securities Exchange Act Release No. 65771 (November 17,
2011) (SR-ISE-2011-60) (order approving expansion of Short Term
Option Program).
\13\ 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.
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-BX-2011-075 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-BX-2011-075. 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
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-BX-2011-075 and should be
submitted on or before December 14, 2011.
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\14\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-30197 Filed 11-22-11; 8:45 am]
BILLING CODE 8011-01-P