[Federal Register Volume 77, Number 250 (Monday, December 31, 2012)]
[Notices]
[Pages 77152-77154]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-31411]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68518; File No. SR-BX-2012-076]


Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
to Extension of the Exchange's Penny Pilot Program

December 21, 2012.
    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 20, 2012, NASDAQ OMX BX, Inc. (``Exchange'' or ``BX'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``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

    BX is filing with the Commission a proposal to: extend through June 
30, 2013, the Penny Pilot Program in options classes in certain issues 
(``Penny Pilot'' or ``Pilot'') and provide a procedure for replacement 
of any Penny Pilot issues that have been delisted.\3\
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    \3\ The Penny Pilot was established in June 2012 and extended in 
July 2012. See Securities Exchange Act Release Nos. 67256 (June 26, 
2012), 77 FR 39277 (July 2, 2012) (SR-BX-2012-030) (order approving 
BX option rules and establishing Penny Pilot); and 67342 (July 3, 
2012), 77 FR 40666 (July 10, 2012) (SR-BX-2012-046) (notice of 
filing and immediate effectiveness extending the Penny Pilot through 
December 31, 2012).
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    The Exchange requests that the Commission waive the 30-day 
operative delay period contained in Exchange Act Rule 19b-4(f)(6)(iii) 
\4\ to the extent needed for timely industry-wide implementation of the 
proposal.
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    \4\ 17 CFR 240.19b-4(f)(6)(iii).
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    Proposed new language is italicized and proposed deleted language 
is [bracketed].\5\
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    \5\ The text of the proposed rule change is available at http://nasdaqomxbx.cchwallstreet.com/, at BX's principal office, and at the 
Commission's Public Reference Room.
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NASDAQ OMX BX Rules

Options Rules

* * * * *

Chapter VI Trading Systems

* * * * *

Sec. 5 Minimum Increments

    (a) The Board may establish minimum quoting increments for options 
contracts traded on BX Options. Such minimum increments established by 
the Board will be designated as a stated policy, practice, or 
interpretation with respect to the administration of this Section 
within the meaning of Section 19 of the Exchange Act and will be filed 
with the SEC as a rule change for effectiveness upon filing. Until such 
time as the Board makes a change in the increments, the following 
principles shall apply:
    (1) If the options series is trading at less than $3.00, five (5) 
cents;
    (2) If the options series is trading at $3.00 or higher, ten (10) 
cents; and

[[Page 77153]]

    (3) For a pilot period scheduled to expire on [December 31, 
2012]June 30, 2013, if the options series is trading pursuant to the 
Penny Pilot program one (1) cent if the options series is trading at 
less than $3.00, five (5) cents if the options series is trading at 
$3.00 or higher, unless for QQQQs, SPY and IWM where the minimum 
quoting increment will be one cent for all series regardless of price. 
A list of such options shall be communicated to membership via an 
Options Trader Alert (``OTA'') posted on the Exchange's web site.
    The Exchange may replace any pilot issues that have been delisted 
with the next most actively traded multiply listed options classes that 
are not yet included in the pilot, based on trading activity for the 
six month period beginning June 1, 2012, and ending November 30, 2012. 
The replacement issues may be added to the pilot on the second trading 
day following January 1, 2013.
    (b) No Change.
* * * * *

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this filing is to amend Chapter VI, Section 5 to: 
extend the Penny Pilot through June 30, 2013, and add a procedure for 
replacing any Penny Pilot issues that have been delisted.
    Under the Penny Pilot, the minimum price variation for all 
participating options classes, except for the Nasdaq-100 Index Tracking 
Stock (``QQQQ''), the SPDR S&P 500 Exchange Traded Fund (``SPY'') and 
the iShares Russell 2000 Index Fund (``IWM''), is $0.01 for all 
quotations in options series that are quoted at less than $3 per 
contract and $0.05 for all quotations in options series that are quoted 
at $3 per contract or greater. QQQQ, SPY and IWM are quoted in $0.01 
increments for all options series. The Penny Pilot is currently 
scheduled to expire on December 31, 2012.
    The Exchange proposes to extend the time period of the Penny Pilot 
through June 30, 2013, and to provide a procedure for adding classes 
that have been delisted from the Penny Pilot. The Exchange proposes 
that any Penny Pilot Program issues that have been delisted may be 
replaced on the second trading day following January 1, 2013.\6\ The 
replacement issues will be selected based on trading activity for the 
six month period beginning June 1, 2012, and ending November 30, 
2012.\7\
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    \6\ The Exchange is making a conforming change in Chapter VI, 
Section 5 to add language regarding delisted issues that was not 
inserted when the Penny Pilot was instituted on the Exchange earlier 
this year. As a result, the Exchange will have exactly the same 
language as used in the Penny Pilot Programs of NASDAQ Options 
Market (``NOM'') and NASDAQ OMX PHLX LLC (``Phlx''), see NOM Chapter 
VI, Section 5 and Phlx Rule 1034; and will have a penny pilot 
delisted issues replacement procedure that is available on all other 
options exchanges.
    \7\ The replacement issues will be announced to the Exchange's 
membership via an Options Trader Alert (OTA) posted on the 
Exchange's Web site.
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    All classes currently participating in the Penny Pilot will remain 
the same and all minimum increments will remain unchanged. The Exchange 
believes the benefits to public customers and other market participants 
who will be able to express their true prices to buy and sell options 
have been demonstrated to outweigh the potential increase in quote 
traffic.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \8\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \9\ in particular, 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 impediments to and perfect the mechanism of a free and open 
market and a national market system. In particular, the proposed rule 
change, which extends the Penny Pilot for an additional six months 
through June 30, 2013, and provides a procedure for adding classes that 
have been delisted from the Penny Pilot will enable public customers 
and other market participants to express their true prices to buy and 
sell options for the benefit of all market participants.
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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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. To the contrary, this 
proposal is pro-competitive because it allows Penny Pilot issues to be 
traded on the Exchange.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
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 \12\ and Rule 19b-
4(f)(6)(iii) thereunder.\13\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6)(iii).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of the filing.\14\ 
However, pursuant to Rule 19b-4(f)(6)(iii),\15\ 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 believes 
that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest because doing so will 
allow the Pilot

[[Page 77154]]

Program to continue without interruption in a manner that is consistent 
with the Commission's prior approval of the extension and expansion of 
the Pilot Program and will allow the Exchange and the Commission 
additional time to analyze the impact of the Pilot Program.\16\ 
Accordingly, the Commission designates the proposed rule change as 
operative upon filing with the Commission.\17\
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    \14\ 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 the 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 pre-filing requirement.
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ See Securities Exchange Act Release No. 61061 (November 24, 
2009), 74 FR 62857 (December 1, 2009) (SR-NYSEArca-2009-44). See 
also See 15 U.S.C. 78c(f).
    \17\ For purposes only of waiving the operative delay for this 
proposal, 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-2012-076 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-2012-076. 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 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-2012-076 and should be 
submitted on or before January 22, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-31411 Filed 12-28-12; 8:45 am]
BILLING CODE 8011-01-P