[Federal Register Volume 78, Number 116 (Monday, June 17, 2013)]
[Notices]
[Pages 36286-36288]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-14241]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69732; File No. SR-Phlx-2013-63]
Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change in Order To
Disseminate a Spot Price for Treasury Options
June 11, 2013.
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 June 3, 2013, NASDAQ OMX PHLX LLC (``Phlx'' or ``Exchange'') 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 the
Substance of the Proposed Rule Change
The Exchange proposes to disseminate a spot price for its
physically-settled options on certain U.S. Treasury notes and U.S.
Treasury bonds (``Treasury Options''). The proposed rule change will be
implemented on a date that is on, or shortly after, the 30th day
following the date of the filing.
II. Self-Regulatory Organization's Statement of the Purpose of, and the
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
On October 4, 2012, the Commission approved the Exchange's proposed
rule change for the listing and trading on the Exchange of Treasury
Options (the ``Listing Filing'').\3\ The purpose of this proposed rule
change is to permit the Exchange to disseminate a spot value for the
on-the-run U.S. Treasury notes and U.S. Treasury Bonds underlying the
Exchange's Treasury Options over the facilities of the Options Price
Reporting Authority (``OPRA'').
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\3\ See Securities Exchange Release Act No. 67976 (October 4,
2012), 77 FR 61794 (October 11, 2012) (SR-Phlx-2012-105) (approval
order). Subsection (a)(1) of Rule 1001D states that the term
``Treasury securities'' (also known as Treasury debt securities)
means a bond or note or other evidence of indebtedness that is a
direct obligation of, or an obligation guaranteed as to principal or
interest by, the United States or a corporation in which the United
States has a direct or indirect interest (except debt securities
guaranteed as to timely payment of principal and interest by the
Government National Mortgage Association). Securities issued or
guaranteed by individual departments or agencies of the United
States are sometimes referred to by the title of the department or
agency involved (e.g., a ``Treasury security'' is a debt instrument
that is issued by the United States Treasury). Phlx Treasury Options
are European-style options on Treasury notes and bonds with a unit
of trading of $10,000.
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In the Listing Filing the Exchange explained that the prices of
Treasury securities are widely disseminated, active, and visible to
traders and investors, from numerous sources including broker dealers.
It explained that there is a high level of price transparency for
Treasury securities because of extensive price dissemination to the
investing public (e.g., commercial and investment banks, insurance
companies, pension funds, mutual funds and retail investors) of price
information by information vendors, including an industry-sponsored
corporation, Govpx, that disseminates price and real-time trading
volume information for Treasury securities via interdealer broker
screens. The Exchange also noted that the prices are also available
from exchanges that trade derivatives on Treasuries \4\ and
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that retail brokers (e.g., Fidelity, TD Ameritrade, E*TRADE, Charles
Schwab, Interactive Brokers, and Scottrade) offer market access and the
ability to purchase and sell Treasury securities on a real time basis,
similarly to equity securities.
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\4\ See, for example, Chicago Mercantile Exchange Group
(``CME'') offering futures as well as options on Treasury
securities, at http://www.cmegroup.com/trading/interest-rates/on-the-run-us-treasuryfutures.html. CME Treasury futures volumes in the
year 2011 include: 315,903,050 contracts on the 10 year Treasury
note; and 92,065,406 contracts on the 30 year Treasury bond. The
Exchange notes that while Treasury options have a face value of
$10,000 per contract (Rule 1008D), CME futures products have a face
value of $100,000.
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In the Listing Filing, the Exchange also noted that it was
considering offering a Treasury data feed to those Exchange members
that may desire to acquire such data from the Exchange. The Exchange
currently secures real-time Treasury prices (data) from BondDesk Group
LLC (``BondDesk''), a market data provider, and uses this data in
support of the Exchange's market, regulatory and surveillance
operations.\5\ For example, this data is now used for the purpose of
opening and determining settlement values for Treasury options. The
Exchange now proposes to also use the BondDesk market data in order to
provide a Treasury data feed to Exchange members. Specifically, the
Exchange will calculate the midpoint of BondDesk's real-time bid and
ask quotations for the on-the-run 10-year Treasury note and the 30-year
Treasury bond (the ``BondDesk On-the-Run Treasury Midpoint'' or
``BTM'') and distribute the BTM to OPRA pursuant to the Exchange's
existing agreements with OPRA.\6\ The Exchange will alert market
participants to the introduction of the new BTM by issuing an Options
Trader Alert. The Exchange will update its Web site to include a link
to the Options Trader Alert which will describe the BTM and which will
itself include a link to this proposed rule change.
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\5\ BondDesk is a provider of enterprise-wide fixed income
solutions to many of the top broker-dealers in North America. The
BondDesk Alternative Trading System (ATS), run by broker-dealer
subsidiary BondDesk Trading LLC, member FINRA and SIPC, provides
real-time Treasury prices (data) generated from the nation's largest
retail bond trading venue. BondDesk data currently is not
redistributed by Phlx but can be received directly by contacting
BondDesk.
\6\ Currently, the Exchange uses the midpoint of BondDesk's
real-time bid and ask quotations to determine settlement prices.
BondDesk data other than the midpoint is used in support of the
Exchange's other market, regulatory and surveillance operations.
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The BTM will be an Exchange-calculated value using the midpoint of
the bid/ask quotes currently provided by BondDesk for the on-the-run
10-year Treasury Note and 30-Year Treasury Bond. The value will be
calculated by the Exchange and disseminated via OPRA with each received
quote from BondDesk and at least once every five seconds, every trading
day from 9:25 a.m. to 4:00 p.m. Eastern Time. For example, if the bid/
offer is 99.50 x 99.60, then the midpoint value of 99.55 would be
disseminated immediately. If no quotes are being received from
BondDesk, the Exchange will manually cease disseminating the BTM until
such time as the Exchange once again begins receiving quotes. If
trading in the Treasury Option is halted, a midpoint value will
continue to be calculated and disseminated as it does not drive the
specialist's quotes and is merely a reference point for trading.
BTM values will be sent out to two decimal places (xx.xx or
xxx.xx). If the calculation of the midpoint extends beyond two decimal
places, the values will be rounded, not truncated, to the nearest
penny.
Example 1: If the most recent bid/offer is 99.59 x 99.61, the
midpoint would be 99.60.
Example 2: If the bid/offer is 97.6563 x 97.6953, then the midpoint
would be 97.68 (rounded up from 97.67578).
Example 3: If the bid/offer is 99.5703 x 99.5781, then the midpoint
would be 99.57 (rounded down from 97.57422).
Example 4: If the bid/offer is 99.50 x 99.55, then the midpoint
would be 99.53 (rounded up from 97.525).
Finally, The [sic] BTM will be represented by a 3 character symbol
which will change with introduction of each new Treasury auction.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the provisions of Section 6 of the Act,\7\ in general, and with Section
6(b)(5) of the Act,\8\ in particular, which requires that the rules of
an exchange be designed to prevent fraudulent and manipulative acts and
practices, promote just and equitable principles of trade, foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, protect investors and the public interest,
because it should provide additional information to market participants
interested in Treasury Options. The Exchange believes that allowing the
Exchange to provide additional spot market information to be
disseminated over OPRA should encourage trading of Treasury Options,
which in turn should enhance competition and allow traders and
investors--including large and institutional investors and retail and
public investors--to more effectively tailor their investing and
hedging decisions in the current challenging economic climate.
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\7\ 15 U.S.C. 78f.
\8\ 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
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended.
Specifically, the proposal does not impose an intra-market burden on
competition, because it will be available to all market participants
who receive OPRA messages. Nor will the proposal impose a burden on
competition among the options exchanges, because the proposal simply
adds information that should be helpful to market participants. The
proposal will allow the Exchange to provide useful pricing information
that in turn should encourage the use of the Exchange's Treasury
Options, a relatively new and innovative options product, giving market
participants the ability to significantly expand their trading and
hedging capabilities.
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: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
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)(ii) of the Act \9\ and
subparagraph (f)(6) of Rule 19b-4 thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its 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.
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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 waiver of the operative delay is
consistent with the protection of investors and the public interest
because doing so will expedite the
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provision to market participants of additional information concerning
the spot price of Treasury securities, at no additional cost, which
should enable market participants to make more informed investment
decisions with respect to Treasury Options. Therefore, the Commission
designates the proposal operative upon filing.\11\
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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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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. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
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-Phlx-2013-63 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-Phlx-2013-63. 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
St. 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
available publicly. All submissions should refer to File Number SR-
Phlx-2013-63, and should be submitted on or before July 8, 2013.
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\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-14241 Filed 6-14-13; 8:45 am]
BILLING CODE 8011-01-P