[Federal Register Volume 80, Number 142 (Friday, July 24, 2015)]
[Notices]
[Pages 44172-44174]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18133]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75489; File No. SR-BOX-2015-26]


Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To Add 
Interpretive Material to BOX Rule 8050 To Indicate That Market Makers 
Will Not Be Obligated To Quote in Adjusted Option Series and To Define 
What Qualifies as an Adjusted Options Series

July 20, 2015.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on July 10, 2015, BOX Options Exchange LLC (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 self-regulatory organization. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to add Interpretive Material (``IM-8050-2'') 
to BOX Rule 8050 (Market Maker Quotations) to indicate that Market 
Makers will not be obligated to quote in adjusted option series and to 
define what qualifies as an adjusted options series. The text of the 
proposed rule change is available from the principal office of the 
Exchange, at the Commission's Public Reference Room and also on the 
Exchange's Internet Web site at http://boxexchange.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 self-regulatory organization 
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 self-regulatory organization 
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 Exchange proposes to add Interpretive Material (``IM-8050-2'') 
to BOX Rule 8050 (Market Maker Quotations) to indicate that Market 
Makers will not be obligated to quote in adjusted option series and to 
define what qualifies as an adjusted options series. This is a 
competitive filing that is based on a proposal submitted by NYSE Arca, 
Inc. (``NYSE Arca'') and approved by the Commission.\3\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 65573 (October 14, 
2011), 76 FR 65305 (October 20, 2011) (Order Approving SR-NYSEArca-
2011-59). See also NYSE Arca Rule 6.37B Market Maker Quotations--OX.
---------------------------------------------------------------------------

    BOX Rule 8050 discusses the quoting obligations that are applicable 
to Market Makers on the Exchange. The Rule states that, in addition to 
other requirements, Market Makers must post valid quotes throughout the 
trading day in its appointed classes at least sixty percent (60%) of 
the time the classes are open for trading.
    The Exchange proposes to define ``adjusted series'' for the purpose 
of BOX Rule 8050. An ``adjusted series'' under the Rule would be 
defined as an option series wherein, as a result of a corporate action 
by the issuer of the underlying security, one option contract in the 
series represents the delivery of other than 100 shares of underlying 
stock or Exchange Traded Fund Shares.
    After a corporate action and a subsequent adjustment to the 
existing options, the series in question are identified by the Options 
Price Reporting Authority (``OPRA'') and at Options Clearing 
Corporation (``OCC'') with a separate symbol consisting of the 
underlying symbol and a numerical appendage. As a standard procedure, 
exchanges listing options on an underlying security which undergoes a 
corporate action resulting in adjusted series will list new standard 
option series across all appropriate expiration months the day after 
the existing series are adjusted. The adjusted series are generally 
active for a short period of time following adjustment, but orders to 
open an options position in the underlying are almost exclusively 
placed in the new standard contracts. Although the adjusted series may 
not expire for as much as 27 months, in a short time the adjusted 
series become inactive. Thus, the burden of quoting these series 
generally outweighs the benefit of being appointed in the class because 
of the lack of interest in the series by various market participants.
    The proposed rule change is similar to the NYSE Arca rule, in that 
the Exchange is merely proposing to exclude the adjusted series from 
the continuous quoting obligation, but not from other obligations under 
BOX Rule 8050. The NYSE Arca rule excludes adjusted option series, and 
series with a time to expiration of nine months or greater, for options 
on equities and Exchange Traded Fund Shares, and series with a time to 
expiration of twelve months or greater for Index options. Similar to 
NYSE Arca, BOX already excludes from continuous quoting requirements 
options series where the time to expiration is greater than nine (9) 
months,\4\ and is now proposing to add the exclusion of adjusted 
series. Of particular note, the proposal would not excuse a Market

[[Page 44173]]

Maker from the obligation, when called upon by an Exchange Official, to 
submit a single valid two-sided quote or maintain continuous quotes in 
one or more series of an option class within the Market Maker's 
appointment whenever, in the judgment of such Exchange Official, it is 
necessary to do so in the interest of maintaining fair and orderly 
markets.\5\
---------------------------------------------------------------------------

    \4\ See BOX Rule 5070(a).
    \5\ See BOX Rule 8050(c)(4).
---------------------------------------------------------------------------

    The current quoting obligation in such illiquid series is a minor 
part of a Market Maker's overall obligation, and the proposed modicum 
of relief is mitigated by the obligation to respond to a request for 
quote from an Exchange Official. Because of the lack of interest in 
such series, there is little demonstrable benefit to being a Market 
Maker in them other than the ability to maintain Market Maker margins 
for what little activity may occur. In addition, the burden of 
continuous quoting in these series is counter to efforts to mitigate 
the number of quotes collected and disseminated.
    The Exchange believes that the proposed rule change should incent 
Market Makers to continue appointments and thereby expand liquidity in 
options classes listed on the Exchange to the benefit of the Exchange 
and its Participants and public customers.
    Additionally, the Exchange recently amended BOX Rule 7300 
(Preferenced Orders) \6\ by adding, among other things, the language of 
``non-adjusted options series'' to indicate that a Preferred Market 
Maker will not be obligated to maintain continuous quotes in adjusted 
series and to define the term adjusted options series. The Exchange 
believes that this proposed rule change will harmonize the quoting 
obligations in adjusted series for Preferred Market Makers and Market 
Makers on the Exchange.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 74952 (May 13, 
2015), 80 FR 28738 (May 19, 2015) (Notice of Filing and Immediate 
Effectiveness of SR-BOX-2015-19).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of section 6(b) of the Securities Exchange Act of 1934 
(the ``Act''),\7\ in general, and section 6(b)(5) of the Act,\8\ 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, 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. In particular, the Exchange believes that, on balance, 
the elimination of the continuous quoting obligations in adjusted 
series is a minor change and should not impact the quality of BOX's 
market. Among other things, adjusted series are not common, and trading 
interest is often very low after the corporate event has passed. 
Consequently, continuous quotes in such series increases quote traffic 
and burdens systems without a corresponding benefit. By not requiring 
Market Makers to continuously quote in such series, the Exchange's 
proposal would further its goal of measured quote mitigation. Further, 
while they will not be tasked with continually quoting such series, 
Market Makers will be obligated to quote the series when called upon by 
an Exchange Official. Accordingly, the proposal supports the quality of 
BOX's market by helping to ensure that Market Makers will continue to 
be obligated to quote in adjusted series when the need arises.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 necessary or appropriate in 
furtherance of the purposes of the Act. In this regard and as indicated 
above, the Exchange notes that the rule change is being proposed as a 
competitive response to a filing submitted by NYSE Arca and approved by 
the Commission.\9\ Accordingly, the Exchange believes that the proposed 
rule change should incent Market Makers to continue appointments and 
thereby expand liquidity in options classes listed on the Exchange to 
the benefit of the Exchange and its Participants and public customers.
---------------------------------------------------------------------------

    \9\ See supra, note 3.
---------------------------------------------------------------------------

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

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

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

    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 for 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 \10\ and Rule 19b-4(f)(6) 
thereunder.\11\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its 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.
---------------------------------------------------------------------------

    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-BOX-2015-26 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BOX-2015-26. 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

[[Page 44174]]

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 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-BOX-2015-26, and should be 
submitted on or before August 14, 2015.

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

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-18133 Filed 7-23-15; 8:45 am]
 BILLING CODE 8011-01-P