Document ID: SEC-2008-0257-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory Organizations; Proposed Rule Changes: Boston Stock Exchange, Inc.
Posted Date: 2008-02-15T05:00Z

[Federal Register: February 15, 2008 (Volume 73, Number 32)]
[Notices]               
[Page 8913-8915]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15fe08-115]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57302; File No. SR-BSE-2008-08]

 
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Expand, and Make Permanent, the $1 Strike Program

February 11, 2008.
    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 28, 2008, the Boston Stock Exchange, Inc. (``BSE'' or 
``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 substantially prepared by the Exchange. 
BSE filed the proposal pursuant to section 19(b)(3)(A) of the Act \3\ 
and Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 the rules of the Boston Options 
Exchange (``BOX'') to expand the $1 Strike Pilot Program (``Program'') 
and request permanent approval of the Program. The text of the proposed 
rule change is available at the Exchange, the Commission's Public 
Reference Room, and http://www.bostonoptions.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 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to expand the Program 
and request permanent approval of the Program.\5\ Chapter IV, section 6 
of the BOX rules establishes guidelines regarding the addition of 
options series for trading on BOX. The Program currently allows the 
Exchange to select a total of 5 individual stocks on which option 
series may be listed at $1 strike price intervals. To be eligible for 
selection into the Program, the underlying stock must close below $20 
in its primary market on the previous trading day. If selected for the 
Program, the Exchange may list strike prices at $1 intervals from $3 to 
$20, 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. The Exchange also may list $1 strikes on any other option 
class designated by other securities exchanges that employ a similar $1 
strikes program under their respective rules. The Exchange may not list 
long-term option series (``LEAPS'') at $1 strike price intervals for 
any class selected for the Program. The Exchange also is restricted 
from listing any series that would result in strike prices being $0.50 
apart.
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    \5\ BSE implemented the Program in February 2004 and extended it 
four times through June 5, 2008. See Securities Exchange Act Release 
Nos. 49292 (February 20, 2004), 69 FR 8993 (February 26, 2004) (SR-
BSE-2004-01) (adopting the Program); 49806 (June 4, 2004), 69 FR 
32640 (June 10, 2004) (SR-BSE-2004-22) (extending the Program until 
June 5, 2005); 51778 (June 2, 2005), 70 FR 33562 (June 8, 2005) (SR-
BSE-2005-18) (extending the Program until June 5, 2006); 53855 (May 
24, 2006), 71 FR 30973 (May 31, 2006) (SR-BSE-2006-19) (extending 
the Program until June 5, 2007); and 55684 (April 30, 2007), 72 FR 
26188 (May 8, 2007) (SR-BSE-2007-17) (extending the Program until 
June 5, 2008).
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    The Exchange proposes to expand the Program to allow it to select a 
total of 10 individual stocks on which option series may be listed at 
$1 strike price intervals. Additionally, the Exchange proposes to 
expand the price range on which it may list $1 strikes, presently from 
$3 to $20, to now include stocks priced from $3 to $50. The existing 
restrictions on listing $1 strikes will continue, e.g., 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 the 
Exchange is restricted from listing any series that would result in 
strike prices being $0.50 apart.
    As stated in the Commission notice initially establishing the 
Program and in the subsequent extensions of the Program,\6\ the 
Exchange believes that $1 strike price intervals provide investors with 
greater flexibility in the trading of equity options that overlie lower 
priced stocks by allowing investors to establish equity options 
positions that are better tailored to meet their investment objectives. 
The Exchange states that Participants representing customers have 
requested that BSE seek to expand the Program, both in terms of the 
number of classes which can be selected and the range in which $1 
strikes may be listed.
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    \6\ See id.
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    With regard to the impact on systems capacities, the Exchange's 
analysis of the Program shows that the impact on BSE's, OPRA's, and 
market data vendors' respective automated systems has been minimal. In 
a previously filed proposed rule change,\7\ the Exchange analyzed the 
trading volume for all classes selected by BOX for the Program as a 
percentage of overall trading volume for all classes on BOX during a 
specific number of months. The Exchange concluded that the classes 
selected for the Program represented on average 2.6% of all trading 
volume on BOX. The Exchange represents that it

[[Page 8914]]

has sufficient capacity to handle an expansion of the Program, as 
proposed.
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    \7\ See Securities Exchange Act Release No. 55684 (April 30, 
2007), 72 FR 26188 (May 8, 2007) (SR-BSE-2007-17).
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    The Exchange believes that the 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, 
BSE requests that the Program be approved on a permanent basis.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of section 6(b) of the Act,\8\ in general, and section 
6(b)(5) of the Act,\9\ in particular, in that it is designed to promote 
just and equitable principles of trade and to protect investors and the 
public interest.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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 that is 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 states that it has neither solicited nor received 
written 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 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\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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 immediately 
implement these listing rules, as proposed, that are similar to those 
implemented by other options exchanges \12\ and do not raise any novel 
issues. In addition, the Exchange believes that the proposed rule 
change is necessary to eliminate any confusion among members of 
multiple exchanges regarding the Program and to allow the Exchange to 
remain competitive. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest because the proposed rule change will provide the 
Exchange's members and customers with added flexibility in the trading 
of equity options and promote, without undue delay, additional 
competition in the market for such options.\13\ For these reasons, the 
Commission designates the proposed rule change as operative upon 
filing. The Commission expects the Exchange to continue to monitor for 
options with little or no open interest and trading activity and to act 
promptly to delist such options. In addition, the Commission expects 
that BSE 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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    \12\ See Securities Exchange Act Release Nos. 57169 (January 18, 
2008), 73 FR 4654 (January 25, 2008) (SR-ISE-2007-110); 57130 
(January 10, 2008), 73 FR 3302 (January 17, 2008) (SR-NYSEArca-2008-
04); 57110 (January 8, 2008), 73 FR 2292 (January 14, 2008) (SR-
Amex-2007-141); 57111 (January 8, 2008), 73 FR 2297 (January 14, 
2008) (SR-Phlx-2008-01); and 57049 (December 27, 2007), 73 FR 528 
(January 3, 2008) (SR-CBOE-2007-125).
    \13\ 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).
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    At any time within 60 days of the filing of the 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 Number SR-BSE-2008-08 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BSE-2008-08. 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 the 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-BSE-2008-08 and should be 
submitted on or before March 7, 2008.

[[Page 8915]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-2852 Filed 2-14-08; 8:45 am]

BILLING CODE 8011-01-P