Document ID: SEC-2009-0391-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2009-03-24T04:00Z

[Federal Register: March 24, 2009 (Volume 74, Number 55)]
[Notices]               
[Page 12408-12410]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24mr09-132]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59589; File No. SR-BX-2009-016]

 
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
the $1 Strike Price Program on the Boston Options Exchange Facility

March 17, 2009.
    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 March 16, 2009, 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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[[Page 12409]]

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

    The Exchange proposes to amend Chapter IV, Section 6 (Series of 
Options Contracts Open for Trading) of the Rules of the Boston Options 
Exchange Group, LLC (``BOX'') to expand the $1 Strike Price Program. 
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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to expand the $1 Strike 
Price Program (the ``Program'').\3\ The $1 Strike Price Program 
currently allows BOX to select a total of 10 individual stocks on which 
option series may be listed at $1 strike price intervals. In order to 
be eligible for selection into the Program, the underlying stock must 
close below $50 in its primary market on the previous trading day. If 
selected for the Program, BOX may list strike prices at $1 intervals 
from $3 to $50, but no $1 strike price may be listed that is greater 
than $5 from the underlying stock's closing price in its primary market 
on the previous day. BOX may also list $1 strikes on any other option 
class designated by another securities exchange that employs a similar 
Program under their respective rules. BOX may not list long-term option 
series (``LEAPS'') at $1 strike price intervals for any class selected 
for the Program. BOX also is restricted from listing any series that 
would result in strike prices being $0.50 apart.
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    \3\ The $1 Strike Price Program was established as a pilot in 
February 2004. See Securities Exchange Act Release Nos. 49292 
(February 20, 2004), 69 FR 8993 (February 26, 2004) (SR-BSE-2004-01) 
(establishing the Pilot Program). The pilot was subsequently 
extended through June 5, 2008. See Securities Exchange Act Release 
Nos. 49806 (June 4, 2004), 69 FR 32640 (June 10, 2004) (SR-BSE-2004-
22); 51778 (June 2, 2005), 70 FR 33562 (June 8, 2005) (SR-BSE-2005-
18); 53855 (May 24, 2006), 71 FR 30973 (May 31, 2006) (SR-BSE-2006-
19); and 55684 (April 30, 2007), 72 FR 26188 (May 8, 2007) (SR-BSE-
2007-17). The pilot was subsequently expanded and made permanent in 
2008. See Securities Exchange Act Release No. 57302 (February 11, 
2008), 73 FR 8913 (February 15, 2008) (SR-BSE-2008-08).
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    The Exchange now proposes to expand the Program to allow BOX to 
select a total of 55 individual stocks on which option series may be 
listed at $1 strike price intervals, and to expand slightly the price 
range on which BOX may list $1 strikes, i.e., from $1 to $50. The 
existing restrictions on listing $1 strikes would continue, i.e., no $1 
strike price may be listed that is greater than $5 from the underlying 
stock's closing price in its primary market on the previous day, and 
BOX is restricted from listing any series that would result in strike 
prices being $0.50 apart.
    As stated in the filings establishing BOX's Program and in 
subsequent extensions and expansions of the Program, BOX believes that 
$1 strike price intervals provide investors with greater flexibility in 
the trading of equity options that overlie lower price stocks by 
allowing investors to establish equity options positions that are 
better tailored to meet their investment objectives. Indeed, 
Participants representing customers have repeatedly requested that BOX 
seek to expand the Program in terms of the number of classes on which 
option series may be listed at $1 strike price intervals. The Exchange 
notes that current market conditions, in which the number of securities 
trading below $50 has increased dramatically, further warrant the 
expansion of the Program.
    The Exchange is also proposing to set forth a delisting policy. 
Specifically, BOX would, on a monthly basis, review series that were 
originally listed under the $1 Strike Price Program with strike prices 
that are more than $5 from the current values of the options classes in 
the Program. BOX would delist series with no open interest in both the 
put and the call series having a: (i) Strike higher than the highest 
strike price with open interest in the put and/or call series for a 
given expiration month; and (ii) strike lower than the lowest strike 
price with open interest in the put and/or call series for a given 
expiration month.
    Notwithstanding the proposed delisting policy, BOX could grant 
Participant requests to add strikes and/or maintain strikes in certain 
options classes in series eligible for delisting.
    Further, in connection with the proposed delisting policy, if BOX 
identifies series for delisting, BOX shall notify other options 
exchanges with similar delisting policies regarding eligible series for 
listing, and shall work with such other exchanges to develop a uniform 
list of series to be delisted, so as to ensure uniform series delisting 
of multiply listed options classes. The Exchange expects that the 
proposed delisting policy will be adopted by other options exchanges 
that amend their rules to employ a similar expansion of the Program.
    With regard to the impact on system capacity, BOX has analyzed its 
capacity and the Exchange represents that BOX and the Options Price 
Reporting Authority (``OPRA'') have the necessary systems capacity to 
handle the additional traffic associated with the listing and trading 
of an expanded number of series as proposed by this filing.
    The Exchange believes that the $1 Strike Price Program has provided 
investors with greater trading opportunities and flexibility and the 
ability to more closely tailor their investment strategies and 
decisions to the movement of the underlying security. Furthermore, the 
Exchange has not detected any material proliferation of illiquid 
options series resulting from the narrower strike price intervals. For 
these reasons, the Exchange requests an expansion of the current 
Program.
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, the Exchange believes that expanding the current $1 
Strike Price Program will result in a continuing benefit to investors 
by giving them more flexibility to closely tailor their investment 
decisions in a greater number of securities.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).

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[[Page 12410]]

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 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 after the date of the filing, or such 
shorter time as the Commission may designate, it 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. BX has met this requirement.
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    The Exchange has asked the Commission to waive the operative delay 
to permit the proposed rule change to become operative prior to the 
30th day after filing. The Commission has determined that waiving the 
30-day operative delay of the Exchange's proposal is consistent with 
the protection of investors and the public interest because such waiver 
will enable the Exchange to implement its proposed expansion of the 
Program contemporaneously with other exchanges,\8\ and respond to 
increased customer demand for $1 strikes without delay.\9\ Therefore, 
the Commission designates the proposal operative upon filing. The 
Commission expects that the Exchange will continue to monitor the 
trading volume associated with the additional options series listed as 
a result of this proposal and the effect of these additional series on 
market fragmentation and on the capacity of the Exchange's, OPRA's, and 
vendors' automated systems.
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    \8\ See Securities Exchange Act Release No. 59587 (March 17, 
2009) (SR-ISE-2009-04, SR-CBOE-2009-001, SR-NYSEArca-2009-10, and 
SR-NYSEALTR-2009-11) (Order Granting Accelerated Approval of 
Proposed Rule Changes, as Amended, to Expand the $1 Strike Program).
    \9\ 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 such proposed rule 
change, the Commission may summarily abrogate 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 No. SR-BX-2009-016 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-2009-016. 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 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 inspection and 
copying 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 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 onlyinformation that you wish to make available publicly. All 
submissions should refer to File No. SR-BX-2009-016 and should be 
submitted on or before April 14, 2009.
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    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-6329 Filed 3-23-09; 8:45 am]

BILLING CODE 8010-01-P