6558 Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Notices 

19 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 73821 

(December 11, 2014), 79 FR 75217 (‘‘Notice’’). 

4 15 U.S.C. 78s(b)(2). 

5 15 U.S.C. 78s(b)(2). 

6 17 CFR 200.30–3(a)(31). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

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 or 

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 CME and on CME’s Web site at 

http://www.cmegroup.com/marketregulation/rule-filings.html. 

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–CME–2015–002 and should 

be submitted on or before February 26, 

2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2015–02251 Filed 2–4–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74184; File No. SR–NYSE– 

2014–65] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Designation of Longer Period for 

Commission Action on Proposed Rule 

Change Amending Its Continued 

Listing Requirements in Relation to the 

Late Filing of a Company’s Annual 

Report With the Securities and 

Exchange Commission as Set Forth in 

Section 802.01E of the Exchange’s 

Listed Company Manual 

January 30, 2015. 

On December 4, 2014, New York 

Stock Exchange LLC (‘‘NYSE’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

amend its continued listing 

requirements in relation to the late filing 

of a company’s annual report with the 

Commission as set forth in Section 

802.01E of the Exchange’s Listed 

Company Manual (‘‘Late Filer Rule’’). 

The proposed rule change was 

published for comment in the Federal 

Register on December 17, 2014.3 The 

Commission received no comment 

letters regarding the proposed rule 

change. 

Section 19(b)(2) of the Act 4 provides 

that within 45 days of the publication of 

notice of the filing of a proposed rule 

change, or within such longer period up 

to 90 days as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or as to which the 

self-regulatory organization consents, 

the Commission shall either approve the 

proposed rule change, disapprove the 

proposed rule change, or institute 

proceedings to determine whether these 

proposed rule changes should be 

disapproved. The 45th day for this filing 

is January 31, 2015. 

The Commission is extending the 45- 

day time period for Commission action 

on the proposed rule change. The 

Commission finds that it is appropriate 

to designate a longer period within 

which to take action on the proposed 

rule change so that it has sufficient time 

to consider the proposed rule change. 

Accordingly, pursuant to Section 

19(b)(2) of the Act 5 and for the reasons 

stated above, the Commission 

designates March 17, 2015, as the date 

by which the Commission should either 

approve or disapprove, or institute 

proceedings to determine whether to 

disapprove, the proposed rule change. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.6

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2015–02267 Filed 2–4–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74178; File No. SR–BOX– 

2015–06] 

Self-Regulatory Organizations; BOX 

Options Exchange LLC; Notice of 

Filing of Proposed Rule Change To 

Amend Its Rules for the Listing and 

Trading on the Exchange of Options 

Settling to the RealVolTM SPY Index 

(‘‘Index’’) 

January 30, 2015. 

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 January 

21, 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 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Rules 6010, 6040, 6090, and 10120 to 

allow for the listing and trading on the 

Exchange of options settling to the 

RealVolTM SPY Index (‘‘Index’’). 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 amend its 

rules to provide for the listing and 

trading on the Exchange of options 

settling to the RealVolTM SPY Index 

(‘‘Index’’). The Index measures the 

realized volatility of the SPDR® S&P 

500® Exchange Traded Fund (ETF) (this 

security is known by its symbol ‘‘SPY’’). 

At settlement, the Index is based on the 

daily closing values of SPY, over the 

previous 21 trading days, as calculated 

by the RealVol Daily Formula, and 

promulgated by The VolX Group 

Corporation (‘‘VolX®’’). Options on the 

Index (proposed symbol ‘‘VOLS’’) will 

be P.M. cash-settled and will have 


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Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Notices 6559 

3After an option class has been approved for 

listing and trading on the Exchange, the Exchange 

may open for trading on any Thursday or Friday 

that is a business day series of options on that class 

that expire on the Friday of the following business 

week that is a business day. See IM–6090–2 to Rule 

6090. 

4See Rule 6090(b)(1). Long term options series 

have up to 180 months to expiration. 

5The SPDR® S&P 500® ETF holds up to 500 

securities listed on U.S. securities exchanges. 

6See https://www.spdrs.com/product/

fund.seam?ticker=SPY. 

7Calculated using data from Yahoo as of January 

16, 2015. 

8Calculated using data from The Options 

Clearing Corp. as of January 16, 2015. 

European-style exercise provisions. In 

addition to standard expiration 

contracts, Short Term Option (‘‘STO’’ or 

‘‘weekly’’) Series 3 and long-term option 

series 4 in VOLS may also be traded. 

Index Design and Composition 

The calculation of the Index is based 

on the methodology developed by VolX, 

a company that develops propriety [sic] 

indices based on realized volatility of 

the underlying asset. The Exchange is 

only proposing to list options that settle 

to the Index at this time; however, the 

methodology can be used to create 

indices based on the realized volatility 

of any underlying asset. SPY, 

historically, has been the largest and 

most actively traded ETF in the United 

States as measured by its assets under 

management and the value of shares 

traded. 

The Index will be calculated and 

maintained by a third-party calculation 

agent acting on behalf of VolX. The 

Index measures the daily (i.e., close-toclose) realized volatility of SPY. The 

Index is based on a 21-trading-day 

rolling realized volatility of the daily 

closing price of the SPY. Realized 

volatility is the ‘‘actual volatility,’’ 

‘‘statistical volatility,’’ or ‘‘asset 

volatility’’ that the underlying asset has 

displayed over a specific period. The 

term ‘‘realized volatility’’ is very closely 

related to ‘‘standard deviation.’’ 

Realized volatility is a specific form of 

standard deviation. If one were to use 

daily returns of an underlying (instead 

of actual prices) and annualize the 

results, standard deviation becomes 

realized volatility. The Index uses a 

modified version of the standard 

deviation formula. 

Where: 

• Vol = realized volatility 

• n = number of trading days in a period 

• Rt = continuously compounded daily 

returns as calculated by the formula: 

Where: 

• Ln = natural logarithm 

• Pt = Underlying Reference Price at time t 

• Pt¥1 = Underlying Reference Price at the 

time period immediately preceding 

time t 

Compared to the normal standard 

deviation formula, the standard 

deviation formula used to calculate the 

Index sets the mean return to zero in 

order to provide a measure of movement 

regardless of direction, instead of 

movement about a trend. Doing so 

makes hedging easier for options traders 

and corresponds to the formula used for 

variance swaps and volatility swaps in 

the over-the-counter market. In 

addition, the formula for the Index sets 

the annualization factor to a constant. A 

constant annualization value of 252 

represents the number of trading days in 

a typical year in the U.S. Because of the 

vagaries of the calendar in any 

particular year and/or the holiday 

schedules in any particular country, the 

actual number of trading days may be 

slightly higher or lower than 252. 

However, it is preferable to have one 

approximate constant than to have a 

variety of exact values. ‘‘Degrees of 

freedom’’ is a term in statistics used to 

extrapolate from a sample of data to the 

entire dataset. Since the intent is to 

provide the exact realized volatility over 

a specific period and not to extrapolate 

that sample dataset to the entire history 

of trading, the formula sets the degrees 

of freedom to zero. Finally, the result is 

typically a value less than 1.00. The 

result is then multiplied by 100 in order 

to bring the values to a more intuitive 

‘‘dollars and cents’’ construct. For 

example, the realized volatility of an 

equity index may be 0.20. Often, traders 

will quote this number as 20%, and the 

formula would disseminate the index 

value as 20.00. 

The SPDR® S&P 500® ETF is the 

largest and most actively traded ETF in 

the U.S.5 According to State Street 

Global Advisor, the Trustee of SPY, as 

of January 16, 2015 the total net assets 

of SPY were approximately $194.8 

billion; the weighted average market 

capitalization of the portfolio 

components was approximately $129 

billion; and the largest market 

capitalization was approximately $630 

billion (Apple Inc., ticker: AAPL).6 For 

the three months ending January 16, 

2015, the average daily volume in SPY 

shares was 125 million, and the average 

value of shares traded was $25.3 

billion.7 For the same period, the 

average daily volume in SPY options 

was approximately 2.7 million 

contracts.8

Index Calculation and Maintenance 

As noted above, the Index will be 

maintained and calculated by a 

calculation agent acting on behalf of 

VolX. The level of the Index will reflect 

the current 21-day realized volatility of 

SPY. The Index will be updated on each 

trading day after the close of trading of 

SPY. If the current published value of 

SPY is not available, because of a 

market disruption event where the 

market cannot open and there is no 

closing price for SPY, for example, the 

Index will continue to be calculated and 

disseminated. The calculation of the 

Index will compensate for the missing 

day’s returns by lowering the value of 

‘‘n’’ in the formula by the number of 

days that there is no closing price for 

SPY. 

As mentioned above, the Index that 

VOLS will settle to is based only on 

daily closing values of SPY. However, a 

real-time version based on the current 

SPY price will also be calculated and 

disseminated during the trading day. 

The real-time version will generally be 

disseminated at least every 15 seconds 

to market data vendors during the 

trading day. The real-time version will 

provide an estimate of the Index at the 

close. The real-time version is 

calculated by taking the current day’s 

closing price for SPY before the close of 

trading (day 22) and weighting it by the 

proportion of time through the current 

trading day, then using the remaining 

weight for the first closing price of SPY 

(day 1). In essence, the first day of the 


rljohnson on DSK3VPTVN1PROD with NOTICESEN05FE15.000</GPH> EN05FE15.001</GPH>
6560 Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Notices 

9Standard options expiring prior to February 1, 

2015 will expire on the Saturday immediately 

following the third Friday of the expiration month 

of such option contract. See Securities Exchange 

Act Release No. 70488 (September 24, 2013), 78 FR 

59998 (September 30, 2013) (Notice of Filing SR– 

BOX–2013–45). 

10Calculated using data from Yahoo.com as of 

October 1, 2014. 

11Options Participants and associated persons are 

bound by the initial and maintenance margin 

requirements of either the Chicago Board Options 

Exchange, Incorporated (‘‘CBOE’’) or the New York 

Stock Exchange. See Rule 10120. 

12See CBOE Rule 12.3. 

13See Rule 6080(c). 

14See Rule 6090(a)(1). 

15See proposed Rule 6090(c)(7) permitting the 

described strike price interval setting regime. 

16 VIX options are used to calculate the CBOE 

VVIX index (aka ‘‘VIX of VIX’’ index). Because VIX 

options are used to calculate a volatility index, 

$0.50 strike price intervals are permitted for VIX 

options where the strike price is less than $75. See 

CBOE Rule 24.9.12. 

17See Rule 6090(c)(3). The term ‘‘reasonably 

related to the current index value of the underlying 

index’’ means that the exercise price is within thirty 

percent (30%) of the current index value, as defined 

in Rule 6090(c)(4). 

18See Securities Exchange Act Release No. 63155 

(October 21, 2010), 75 FR 66402 (October 28, 2010) 

(SR–CBOE–2010–096). 

19See Rule 6090(a)(3). 

20 Id. 

21See Securities Exchange Act Release No. 67936 

(September 27, 2012), 77 FR 60491 (October 3, 

2012) (Notice of Filing and Immediate Effectiveness 

of SR–BOX–2012–013). 

period (22 trading days prior to the 

current day) and the last day of the 

period (the current trading day) will 

have a weight of 100% in total, while 

the days in between will have a weight 

of 100% each. In this way, the 22 

returns will be weighted as if there are 

only 21 returns and the Index will, 

therefore, be updating throughout the 

day as the current SPY price changes. 

The Exchange notes that after the 

market close the real-time formula and 

the formula used to calculate the Index 

will have exactly the same value. 

Values of the Index will also be 

disseminated to market information 

vendors such as Bloomberg and 

ThomsonReuters [sic]. In the event the 

Index ceases to be maintained or 

calculated, the Exchange will not list 

any additional series for trading and 

will limit all transactions in such 

options to closing transactions only for 

the purpose of maintaining a fair and 

orderly market and protecting investors. 

Exercise and Settlement Value 

Standard options on the Index will 

expire on the third Friday of each 

month.9 Trading in expiring options on 

the Index will normally cease at 4:15 

p.m. (Eastern time) on the business day 

of expiration, or, in the case of an option 

contract expiring on a day that is not a 

business day, on the last business day 

before its expiration. The exercise and 

settlement value will be calculated 

based on the Index value at the close of 

the last business day of trading, which 

is ultimately based on the closing price 

of SPY on the last business day of 

trading, for its final input value. The 

exercise-settlement amount is equal to 

the difference between the settlement 

value and the exercise price of the 

option, multiplied by $100. Exercise 

will result in the delivery of cash on the 

business day following expiration. 

The following are certain value 

characteristics of the Index: (i) The 

initial index value was 12.91 on March 

2, 1993 (21 trading days after the SPY 

security was listed for trading); (ii) the 

index value on September 30, 2014 was 

9.16; (iii) the lowest index value since 

inception was 5.14 and occurred on 

August 31, 1995; and (iv) the highest 

index value since inception was 91.25 

and occurred on October 28, 2008.10

Contract Specifications 

The contract specifications for VOLS 

are set forth in Exhibit 3–1. The Index 

is a broad-based index, as defined in 

Rule 6010(j). VOLS are European-style 

and P.M. cash-settled. The Exchange’s 

standard trading hours for index options 

(9:30 a.m. to 4:15 p.m., Eastern time) 

will apply to VOLS. With respect to 

margin requirements 11 for VOLS, the 

Exchange proposes to apply margin 

requirements for the purchase and sale 

of VOLS that are identical to the margin 

requirements adopted by the CBOE for 

the CBOE Volatility Index. In order to 

avoid confusion, the Exchange is 

proposing to amend Rule 10120 to make 

clear that the margin requirements for 

VOLS will be identical to those adopted 

by CBOE for the CBOE Volatility 

Index.12

The trading of VOLS will be subject 

to the trading halt procedures applicable 

to other index options traded on the 

Exchange.13 VOLS will be quoted and 

traded in U.S. dollars.14 Accordingly, all 

Exchange and Options Clearing 

Corporation members shall be able to 

accommodate trading, clearance, and 

settlement of VOLS without alteration. 

The Exchange is proposing to 

establish a strike price setting regime for 

VOLS similar to what is permitted for 

CBOE Volatility Index (‘‘VIX’’) 

options.15 The Exchange proposes to 

permit $0.50 strike price (or greater) 

intervals for VOLS where the strike 

price is less than $75. Fifty cent strike 

price (or greater) intervals are currently 

permitted for VIX options where the 

strike price is less than $75.16 Next, the 

Exchange proposes to permit $1 strike 

price (or greater) intervals for VOLS 

where the strike price is $200 or less. 

The Exchange notes that $1 strike price 

(or greater) intervals where the strike 

price is $200 or less are permitted for 

VIX options pursuant to CBOE Rule 

24.9.01(l). Finally, the Exchange 

proposes to permit $5 strike price (or 

greater) intervals for VOLS when the 

strike price is greater than $200. The 

Exchange notes that $5 strike price (or 

greater) intervals where the strike price 

is more than $200 are permitted for VIX 

options pursuant to CBOE Rule 

24.9.01(l). The Exchange believes that 

these more granular strike price 

intervals will provide investors with 

greater flexibility by allowing them to 

establish positions that are better 

tailored to meet their investment 

objectives. 

Currently, when new series of index 

options with a new expiration date are 

opened for trading, or when additional 

series of index options in an existing 

expiration date are opened for trading as 

the current value of the underlying 

index moves substantially from the 

exercise prices of series already opened, 

the exercise prices of such new or 

additional series shall be reasonably 

related to the current value of the 

underlying index at the time such series 

are first opened for trading.17 The 

Exchange, however, proposes to 

eliminate this range limitation that will 

limit the number of strikes that may be 

listed in VOLS. The Exchange’s 

proposal to set minimum strike price 

intervals without a range limitation is 

identical to strike price intervals 

adopted by CBOE for the VIX.18

In accordance with Rule 7050, The 

Exchange also proposes to adopt 

minimum trading increments for 

options on the Index to be $0.05 for 

series trading below $3, and $0.10 for 

series trading at or above $3. 

The Exchange’s rules provide that 

index option contracts may expire at 

three (3)-month intervals or in 

consecutive months.19 The Exchange 

may list up to six (6) expiration months 

at any one time, but will not list index 

options that expire more than twelve 

(12) months out. The Exchange proposes 

to list VOLS in the six consecutive 

expiration months. For example, six 

monthly expirations from January 

through June may be listed.20

The Exchange proposes that there 

shall be no position or exercise limits 

for VOLS. As noted above, the Index 

will settle using published quotes from 

its corresponding security, specifically 

SPY. Given that there are currently no 

position limits for SPY options,21 the 

Exchange believes it is appropriate for 


rljohnson on DSK3VPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Notices 6561 

22See Securities Exchange Act Release No. 54019 

(June 20, 2006), 71 FR 36569 (June 27, 2006) (SR– 

CBOE–2006–55). Additionally, the Exchange notes 

there are currently a number of actively-traded 

broad-based index options, i.e., DJX, NDX, SPX, that 

are also not subject to any position or exercise 

limits. 

23See IM–6090–2(b)(5) to Rule 6090. 

24See Rule 100(a)(45). The terms ‘‘Order Flow 

Provider’’ or ‘‘OFP’’ mean those Options 

Participants representing as agent Customer Orders 

on BOX and those non-Market Maker Participants 

conducting proprietary trading. 

25SPY share volume as of June 20, 2013 was 

approximately 137 million shares per day. See 

supra note 5 [sic]. 

there to be no position or exercise limits 

for VOLS. Because the size of the market 

underlying SPY is so large, the 

Exchange believes that this should 

dispel any concerns regarding market 

manipulation. By extension, the 

Exchange believes that the same 

reasoning applies to VOLS since the 

value of VOLS is derived from the 

realized volatility of SPY. The Exchange 

notes that options on CBOE’s Volatility 

Index are also not subject to any 

position or exercise limits.22

The trading of VOLS shall be subject 

to the same rules that presently govern 

the trading of Exchange index options, 

including sales practice rules, and 

trading rules. As mentioned above, the 

margin requirements shall be the same 

as those adopted by CBOE for the CBOE 

Volatility Index. Further, pursuant to 

IM–6090–2 to Rule 6090, the Exchange 

may also list Short Term Option Series 

on the Index. After an option class has 

been approved for listing and trading on 

the Exchange, the Exchange may open 

Short Term Option Series for trading on 

any Thursday or Friday that is a 

business day and that expire on each of 

the next five Fridays that are business 

days and are not Fridays in which 

monthly options series or Quarterly 

Options Series expire. The interval 

between strike prices on Short Term 

Options Series may be $0.50 or greater 

where the strike price is less than $75, 

and $1 or greater where the strike price 

is between $75 and $150.23 During the 

month prior to expiration of an index 

option class that is selected for the Short 

Term Option Series Program, the strike 

price intervals for the related non-Short 

Term Option shall be the same as the 

strike price intervals for the Short Term 

Option. 

Section 4000 of the Exchange’s rules 

is designed to protect public customer 

trading and shall apply to trading in 

VOLS. Specifically, Rules 4020(a) and 

(b) prohibit Order Flow Providers 

(‘‘OFP’’) 24 from accepting a Public 

Customer order to purchase or write an 

option, including VOLS, unless such 

customer’s account has been approved 

in writing by a designated Options 

Principal of the OFP. Additionally, Rule 

4040 regarding suitability is designed to 

ensure that options, including VOLS, 

are sold only to customers capable of 

evaluating and bearing the risks 

associated with trading in this 

instrument. Further, Rule 4050 permits 

OFPs to exercise discretionary power 

with respect to trading options, 

including VOLS, in a Public Customer’s 

account only if the OFP has received 

prior written authorization from the 

customer and the account has been 

accepted in writing by a designated 

Options Principal. Finally, Rule 4030, 

Supervision of Accounts, Rule 4060, 

Confirmation to Public Customers, and 

Rule 4100, Delivery of Current Options 

Disclosure Documents and Prospectus, 

will also apply to trading in VOLS. 

Surveillance and Capacity 

The Exchange has an adequate 

surveillance program in place for VOLS 

and intends to apply those same 

program procedures that it applies to 

the Exchange’s other options products. 

Index products and their respective 

symbols are integrated into the 

Exchange’s existing surveillance system 

architecture and are thus subject to the 

relevant surveillance processes. This is 

true for both surveillance system 

processing and manual processes that 

support the Exchange’s surveillance 

program. Additionally, the Exchange is 

also a member of the Intermarket 

Surveillance Group (‘‘ISG’’) under the 

Intermarket Surveillance Group 

Agreement dated June 20, 1994. The 

members of the ISG include all of the 

U.S. registered stock and options 

markets: NYSE MKT LLC, NYSE Arca, 

Inc., BATS Exchange, Inc., NASDAQ 

OMX BX, Chicago Board Options 

Exchange, Inc., Chicago Stock Exchange, 

Inc., Financial Industry Regulatory 

Authority, NASDAQ Stock Market LLC, 

National Stock Exchange, Inc., the New 

York Stock Exchange LLC, and 

NASDAQ OMX PHLX, Inc. The ISG 

members work together to coordinate 

surveillance and investigative 

information sharing in the stock and 

options markets. 

Per the proposed rule change, the 

Index will be settled using a calculation 

based on the daily closing prices of the 

SPY. The Exchange believes that 

manipulating the settlement value will 

be difficult based on the size of the 

market for SPY shares. The vast 

liquidity of SPY shares ensures a 

multitude of market participants at any 

given time.25 Due to the high level of 

participation among market makers that 

can enter quotes in SPY shares, the 

Exchange believes it would be very 

difficult for a single participant to alter 

the closing price in any significant way 

without exposing the would-be 

manipulator to regulatory scrutiny and 

financial costs. In addition, since the 

Index is based on 21 trading days of 

data, any manipulation in a single 

closing value of SPY should have a 

muted impact on the Index. 

The Exchange reiterates that it is 

unlikely that the Index settlement value 

could be manipulated. Nonetheless, the 

Exchange, in its normal course of 

surveillance, will monitor for any 

potential manipulation of the Index 

settlement value according to the 

Exchange’s current procedures. 

The Exchange believes that the 

surveillance procedures currently in 

place will allow the Exchange to 

adequately surveil for any potential 

manipulation in the trading of VOLS. 

The Exchange represents that it has 

the necessary system capacity to 

support additional quotations and 

messages that will result from the listing 

and trading of VOLS. 

Pilot Program 

As proposed, the proposal would 

become effective on a pilot program 

basis for a period of twelve months. If 

the Exchange were to propose an 

extension of the program or should the 

Exchange propose to make the program 

permanent, then the Exchange would 

submit a filing proposing such 

amendments to the program. The 

Exchange notes that any positions 

established under the pilot would not be 

impacted by the expiration of the pilot. 

For example, a position in a VOLS 

series that expires beyond the 

conclusion of the pilot period could be 

established during the 12-month pilot. If 

the pilot program were not extended, 

then the position could continue to 

exist. However, the Exchange notes that 

any further trading in the series would 

be restricted to transactions where at 

least one side of the trade is a closing 

transaction. 

The Exchange proposes to submit a 

pilot program report to the Securities 

and Exchange Commission (the 

‘‘Commission’’) two months prior to the 

expiration date of the Pilot Program (the 

‘‘annual report’’). The annual report 

would contain an analysis of volume, 

open interest, and trading patterns. The 

analysis would examine trading in the 

proposed option product as well as 

trading in SPY. In addition, for series 

that exceed certain minimum open 

interest parameters, the annual report 

would provide analysis of index price 

volatility and SPY trading activity. In 

addition to the annual report, the 


rljohnson on DSK3VPTVN1PROD with NOTICES
6562 Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Notices 

26 15 U.S.C. 78f(b). 

27 15 U.S.C. 78f(b)(5). 

Exchange would provide the 

Commission with periodic interim 

reports while the pilot is in effect that 

would contain some, but not all, of the 

information contained in the annual 

report. The annual report would be 

provided to the Commission on a 

confidential basis. 

The annual report would contain the 

following volume and open interest 

data: 

(1) Monthly volume aggregated for all 

trades; 

(2) monthly volume aggregated by 

expiration date; 

(3) monthly volume for each 

individual series; 

(4) month-end open interest 

aggregated for all series; 

(5) month-end open interest for all 

series aggregated by expiration date; and 

(6) month-end open interest for each 

individual series. 

In addition to the annual report, the 

Exchange would provide the 

Commission with interim reports of the 

information listed in Items (1) through 

(6) above periodically as required by the 

Commission while the pilot is in effect. 

These interim reports would also be 

provided on a confidential basis. 

In addition, the annual report would 

contain the following analysis of trading 

patterns in VOLS series in the pilot: 

(1) A time series analysis of open 

interest; and 

(2) an analysis of the distribution of 

trade sizes. 

Also, for series that exceed certain 

minimum parameters, the annual report 

would contain the following analysis 

related to index price changes and SPY 

trading volume at the close on 

expiration Fridays: 

(1) A comparison of index price 

changes at the close of trading on a 

given expiration Friday with 

comparable price changes from a control 

sample. The data would include a 

calculation of percentage price changes 

for various time intervals and compare 

that information to the respective 

control sample. Raw percentage price 

change data as well as percentage price 

change data normalized for prevailing 

market volatility, as measured by the 

Chicago Board Options Exchange, 

Incorporated (‘‘CBOE’’) Volatility Index 

(VIX), would be provided; and 

(2) a calculation of trading volume for 

a sample set of SPY representing an 

upper limit on trading that could be 

attributable to expiring in-the-money 

series. The data would include a 

comparison of the calculated volume for 

SPY in the sample set to the average 

daily trading volumes of SPY over a 

sample period. 

The minimum open interest 

parameters, control sample, time 

intervals, and sample periods would be 

determined by the Exchange and the 

Commission. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 26 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 27

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. In 

particular in that it will permit options 

trading in the Index pursuant to rules 

designed to prevent fraudulent and 

manipulative acts and practices and 

promote just and equitable principles of 

trade. The Exchange believes the 

proposed rule change will further the 

Exchange’s goal of introducing new and 

innovative products to the marketplace. 

The Exchange believes that listing VOLS 

will provide an opportunity for 

investors to hedge, or speculate on, the 

market risk associated with changes in 

realized volatility. 

Volatility-focused products have 

become more prominent over the past 

few years, and in a number of different 

formats and types, including ETFs, 

exchange-traded notes, exchange-traded 

options, and exchange-traded futures. 

Such products offer investors the 

opportunity to manage their volatility 

risks associated with an underlying 

asset class. Currently, most of the 

products focus on underlying equity 

indexes or equity-based portfolios. The 

Exchange proposes to introduce a cashsettled options contract on a new 

volatility index, which focuses on the 

volatility of the daily closing price of 

the SPY. SPY is the largest and most 

liquid ETF in the United States, and the 

most actively traded equity option 

product. The Exchange believes that 

because the Index is derived from 

published SPY prices, and given the 

immense liquidity found in the 

individual portfolio components of SPY, 

the concern that the Index will be 

subject to market manipulation is 

greatly reduced. In addition, because the 

Index comprises 21 days of SPY closing 

prices, the potential for manipulation is 

reduced even further. Therefore, the 

Exchange believes that the proposed 

rule change to list options on the Index 

is appropriate. 

The Exchange further notes that Rules 

that apply to the trading of other index 

options currently traded on the 

Exchange would also apply to the 

trading of VOLS. Additionally, the 

trading of VOLS would be subject to, 

among others, Exchange Rules 

governing margin requirements and 

trading halt procedures. 

Finally, the Exchange represents that 

it has an adequate surveillance program 

in place to detect manipulative trading 

in VOLS. The Exchange also represents 

that it has the necessary systems 

capacity to support the new options 

series. And as stated in the filing, the 

Exchange has rules in place designed to 

protect public customer trading. 

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. The 

Exchange notes that the proposed rule 

change will facilitate the listing and 

trading of a novel index option product 

that will enhance competition among 

market participants, to the benefit of 

investors and the marketplace. 

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 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be 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: 


rljohnson on DSK3VPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 24 / Thursday, February 5, 2015 / Notices 6563 

28 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See NYSE Amex Options Fee Schedule, dated 

January 14, 2015, available here, https://

www.theice.com/publicdocs/nyse/markets/amexoptions/NYSE_Amex_Options_Fee_Schedule.pdf. 4 In calculating ADV, the Exchange will utilize 

monthly reports published by the OCC for equity 

options and ETF options that show cleared volume 

by account type. See OCC Monthly Statistics 

Reports, available here, http://www.theocc.com/

webapps/monthly-volume-reports (including for 

equity options and ETF options volume, subtotaled 

by exchange, along with OCC total industry 

volume). The Exchange will calculate the total OCC 

volume for equity and ETF options that cleared in 

the Customer account type and divide this total by 

the number of trading days for that month (i.e., any 

day the Exchange is open for business). For 

example, in a month having 21 trading days where 

there were 252,000,000 equity option and ETF 

option contracts that cleared in the Customer 

account type, the calculated ADV would be 

12,000,000 (252,000,000/21 = 12,000,000). 

5Electronic Customer volume is volume executed 

electronically through the Exchange System, on 

behalf of an individual or organization that is not 

a Broker-Dealer and who does not meet the 

definition of a Professional Customer. 6See supra n. 4. 7 Id. 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

BOX–2015–06 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–BOX–2015–06. 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 such 

filing will also 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– 

2015–06 and should be submitted on or 

before February 26, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.28

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2015–02250 Filed 2–4–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74180; File No. SR– 

NYSEMKT–2015–07] 

Self-Regulatory Organizations; NYSE 

MKT LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Amending the NYSE 

Amex Options Fee Schedule To Make 

a Change to the Amex Customer 

Engagement Program in Section I.E. of 

the Fee Schedule 

January 30, 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 January 

28, 2015, NYSE MKT LLC (the 

‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with 

the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend the 

NYSE Amex Options Fee Schedule 

(‘‘Fee Schedule’’) to make a change to 

the Amex Customer Engagement 

(‘‘ACE’’) Program in section I.E. of the 

Fee Schedule. The Exchange proposes 

to implement the change on February 2, 

2015. The text of the proposed rule 

change is available on the Exchange’s 

Web site at www.nyse.com, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

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 those 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 parts 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 Exchange proposes to make a 

change to the ACE Program in section 

I.E. of the Fee Schedule. The Exchange 

proposes to implement the change on 

February 2, 2015. 

Section I.E. of the Fee Schedule 

describes the ACE Program,3 which 

features four tiers expressed as a 

percentage of total industry Customer 

equity and ETF option average daily 

volume (‘‘ADV’’).4 Specifically, the ACE 

Program consists of a four-tiered 

schedule of per contract credits payable 

to an Order Flow Provider (‘‘OFP’’) 

solely for Electronic Customer volume 

that the OFP, as agent, submits to the 

Exchange.5 The ACE Program offers the 

following two methods for OFPs to 

receive credits: 

1. By calculating, on a monthly basis, 

the average daily Customer contract 

volume an OFP executes Electronically 

on the Exchange as a percentage of total 

industry Customer equity and ETF 

options ADV; 6 or 

2. By calculating, on a monthly basis, 

the average daily contract volume an 

OFP executes Electronically in all 

participant types (i.e., Customer, Firm, 

Broker-Dealer, NYSE Amex Options 

Market Maker, Non-NYSE Amex 

Options Market Maker, and Professional 

Customer) on the Exchange, as a 

percentage of total industry Customer 

equity and ETF options ADV,7 of which 

at least 20% must be Customer volume 

executed Electronically. 

The Exchange has received questions 

regarding qualification for credits under 


rljohnson on DSK3VPTVN1PROD with NOTICES