Document ID: SEC-2010-1448-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2010-09-22T04:00Z

[Federal Register: September 22, 2010 (Volume 75, Number 183)]
[Notices]               
[Page 57823-57825]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22se10-113]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62909; File No. SR-BX-2010-063]

 
 Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Adding the 
CBOE Volatility Index Futures to the Definition of a Futures Reference 
Asset in Chapter IV, Section 3(k)(i)(5)

September 14, 2010.
    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 September 8, 2010, 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 self-regulatory organization. The Commission is 
publishing this notice to solicit comments on the proposed rule 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

    The Exchange proposes to amend Chapter IV, Section 3 (Criteria for 
Underlying Securities) of the Rules of the Boston Options Exchange 
Group, LLC (``BOX'') to permit options on

[[Page 57824]]

Futures-Linked Securities to be based on products linked to CBOE 
Volatility Index Futures (``VIX Futures''). 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://nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/
Filings/.

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Chapter IV, Section 3(k) of the BOX Rules designates the listing 
and trading of options on equity index-linked securities (``Equity 
Index-Linked Securities'', ``Commodity-Linked Securities'', ``Currency-
Linked Securities'', ``Fixed Income Index-Linked Securities'', 
``Futures-Linked Securities'' and ``Multifactor Index-Linked 
Securities'', collectively known as ``Index-Linked Securities'') that 
are principally traded on a national securities exchange and are 
defined as an ``NMS Stock'' (as defined in Rule 600 of Regulation NMS 
under the Securities and [sic] Exchange Act of 1934). BOX proposes to 
amend the definition of Futures-Linked Securities for the trading of 
options on Index-Linked Securities to include products linked to CBOE 
Volatility Index (VIX) Futures.
    Specifically, the Exchange proposes to add the CBOE Volatility 
Index (VIX) Futures to the definition of a Futures Reference Asset in 
Chapter IV, Section 3(k)(i)(5) of the BOX Rules.
    Index-Linked Securities are designed for investors who desire to 
participate in a specific market segment by providing exposure to one 
or more identifiable underlying securities, commodities, currencies, 
derivative instruments or market indexes of the foregoing (``Underlying 
Index'' or ``Underlying Indexes''). Index-Linked Securities are the 
non-convertible debt of an issuer that have a term of at least one (1) 
year but not greater than thirty (30) years. Despite the fact that 
Index-Linked Securities are linked to an underlying index, each trades 
as a single, exchange-listed security. Accordingly, rules pertaining to 
the listing and trading of standard equity options apply to Index-
Linked Securities.
    Currently, the Exchange will consider listing and trading options 
on Index-Linked Securities provided the Index-Linked Securities meet 
the criteria for underlying securities set forth in Chapter IV, Section 
3(a)-(b) of the BOX Rules.
    Index-Linked Securities must meet the criteria and guidelines for 
underlying securities set forth in Chapter IV, Section 3(b) of the BOX 
Rules; or the Index-Linked Securities must be redeemable at the option 
of the holder at least on a weekly basis through the issuer at a price 
related to the applicable underlying Reference Asset.\3\ In addition, 
the issuing company is obligated to issue or repurchase the securities 
in aggregation units for cash or cash equivalents satisfactory to the 
issuer of Index-Linked Securities which underlie the option as 
described in the Index-Linked Securities prospectus.
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    \3\ For the purposes of Chapter IV, Section 3(k) of the BOX 
Rules, Equity Reference Assets, Commodity Reference Assets, Currency 
Reference Assets, Fixed Income Reference Assets, Futures Reference 
Assets together with Multifactor Reference Assets, collectively will 
be referred to as ``Reference Assets'', as defined in Chapter IV, 
Section 3(k)(ii) of the BOX Rules.
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    Options on Index-Linked Securities will continue to be subject to 
all BOX rules governing the trading of equity options. The current 
continuing or maintenance listing standards for options traded on BOX 
will continue to apply.
The VIX
    The information in this filing relating to the VIX was taken from 
the Web site of the Chicago Board Options Exchange (the ``CBOE'').
    The VIX was originally developed by the CBOE in 1993 and was 
calculated using S&P 100[supreg] Index options. The current methodology 
for the VIX was introduced by the CBOE in September 2003 and it is now 
an index that uses the quotes of certain S&P 500[supreg] Index 
(``SPX'') option series to derive a measure of the volatility of the 
U.S. equity market. The VIX measures market expectations of near term 
volatility conveyed by the prices of options on the SPX. It provides 
investors with up-to-the-minute market estimates of expected stock 
market volatility over the next 30 calendar days by extracting implied 
volatilities from real-time index option bid/ask quotes.
VIX Futures
    Information regarding VIX Futures can be found on the Web site of 
the CBOE Futures Exchange (the ``CFE''). The CFE began listing and 
trading VIX Futures since March 26, 2004 under the ticker symbol VX. 
VIX Futures trade between the hours of 8:30 a.m.-3:15 p.m. Central Time 
(Chicago Time).
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\4\ in general, and Section 
6(b)(5) of the Act,\5\ in particular, in that it is designed to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism for a free and open market and a national market 
system and, in general, to protect investors and the public interest. 
In particular, Exchange believes that the proposed rules applicable to 
trading pursuant to generic listing and trading criteria, together with 
the Exchange's surveillance procedures applicable to trading in the 
securities covered by the proposed rules, serve to foster investor 
protection.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 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 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

    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 foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate if consistent

[[Page 57825]]

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 \6\ and Rule 19b-4(f)(6) thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with 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. The Exchange has fulfilled this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange requests that the Commission waive 
the 30-day operative delay so that the Exchange can list and trade 
options on Futures-Linked Securities linked to CBOE VIX Futures 
immediately. The Commission believes that waiving the 30-day operative 
delay to permit the Exchange to list and trade options on Futures-
Linked Securities linked to CBOE VIX Futures without delay is 
consistent with the protection of investors and the public interest.\8\ 
The Commission notes the proposal is substantively identical to 
proposals that were recently approved by the Commission, and does not 
raise any new regulatory issues.\9\ For these reasons, the Commission 
designates the proposed rule change as operative upon filing.
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    \8\ For purposes only of waiving the 30-day operative delay, the 
Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \9\ See Securities Exchange Act Release No. 60857 (Oct. 21, 
2009), 74 FR 55611 (Oct. 28, 2009) (SR-CBOE-2009-074); See also 
Securities Exchange Act Release No. 60822 (Oct. 14, 2009), 74 FR 
54114 (Oct. 21, 2009) (SR-NYSEArca-2009-77); and Securities Exchange 
Act Release No. 60823 (Oct. 14, 2009), 74 FR 54112 (Oct. 21, 2009) 
(SR-NYSEAmex-2009-59).
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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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-BX-2010-063 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-2010-063. This file 
number should be included on the subject line if e-mail 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 website (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 website 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.\10\ 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-2010-063 and should be 
submitted on or before October 13, 2010.
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    \10\ The text of the proposed rule change is available on the 
Commission's Web site at http://www.sec.gov.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-23603 Filed 9-21-10; 8:45 am]
BILLING CODE 8010-01-P