Document ID: SEC-2008-0991-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Boston Stock Exchange, Inc.
Posted Date: 2008-07-17T04:00Z

[Federal Register: July 17, 2008 (Volume 73, Number 138)]
[Notices]               
[Page 41138-41140]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17jy08-136]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58131; File No. SR-BSE-2008-37]

 
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Extend the Current Pilot Program for Quarterly Options Series on the 
Boston Options Exchange Facility

July 9, 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 July 8, 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 prepared by the Exchange. The Exchange 
has designated this proposal as non-controversial under Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ 
which renders the proposed rule change effective upon filing with the 
Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

    The Exchange is proposing to extend until July 10, 2009, the 
current pilot program applicable to the Quarterly Options Series 
(``Pilot Program'') on the Boston Options Exchange (``BOX'') facility. 
The text of the proposed rule change is available on the Exchange's Web 
site (http://www.bostonstock.com), at the Exchange's principal office, 
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 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 Exchange is proposing to extend through July 10, 2009, the 
Pilot Program on BOX to list options series that expire at the close of 
business on the last business day of a calendar quarter (``Quarterly 
Options Series'').\5\ The Pilot Program is currently set to expire on 
July 10, 2008. Under the Pilot Program, BOX may open Quarterly Options 
Series on up to five (5) currently listed options classes that are 
either index options or options on exchange traded funds (or 
``Exchange-Traded Fund Shares'').\6\ BOX also may list Quarterly 
Options Series on any options classes that are selected

[[Page 41139]]

by other securities exchanges that employ a similar pilot program under 
their respective rules.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 56086 (July 17, 
2007), 72 FR 40182 (July 23, 2007) (SR-BSE-2007-36).
    \6\ See Section 3 of Chapter IV of the BOX Rules pertaining to 
Exchange-Traded Fund Shares.
---------------------------------------------------------------------------

    The Exchange has selected the following five options classes to 
participate in the Pilot Program: the Standard & Poor's Depositary 
Receipts[supreg] (SPY); Powershares[supreg] QQQ Trust Series 1 (QQQQ); 
Diamonds[supreg] Trust Series 1 (DIA); iShares Russell 2000[supreg] 
Index Fund (IWM); and Select Sector SPDR[supreg]--Energy (XLE). The 
Exchange believes the Pilot Program has been successful and well 
received by its Participants and the investing public. Thus, the 
Exchange proposes to extend the Pilot Program through July 10, 2009.
    In support of this proposed rule change, and as stipulated in the 
original Pilot Program proposal, the Exchange submitted to the 
Commission a report (``BOX Pilot Report'') under separate cover, along 
with a request for confidential treatment under the Freedom of 
Information Act, detailing the Exchange's experience with the Pilot 
Program.\7\ The Exchange also submitted, in an addendum to its Report 
(``Addendum''), data required by the recent amendment to the Pilot 
Program permitting the listing of additional ETF Quarterly Option 
Series.\8\ Specifically, the BOX Pilot Report contains data and written 
analysis regarding the five options classes included in the Pilot 
Program.
---------------------------------------------------------------------------

    \7\ As set forth in SR-BSE-2007-36, if the Exchange were to 
propose an extension, an expansion, or permanent approval of the 
Pilot Program, it would submit, along with any filing proposing such 
amendments to the Pilot Program, a report providing an analysis of 
the Pilot Program covering the entire period during which the Pilot 
Program was in effect, and would include, at a minimum: (1) Data and 
written analysis on the open interest and trading volume in the 
classes for which Quarterly Option Series were opened; (2) an 
assessment of the appropriateness of the option classes selected for 
the Pilot Program; (3) an assessment of the impact of the Pilot 
Program on the capacity of BOX, OPRA, and market data vendors (to 
the extent data from market data vendors is available); (4) any 
capacity problems or other problems that arose during the operation 
of the Pilot Program and how BOX addressed such problems; (5) any 
complaints that the Exchange received during the operation of the 
Pilot Program and how BOX addressed them; and (6) any additional 
information that would assist in assessing the operation of the 
Pilot Program. The report must be submitted to the Commission at 
least sixty (60) days prior to the expiration date of the Pilot 
Program.
    \8\ See Securities Exchange Act Release No. 57598 (April 1, 
2008), 73 FR 18828 (April 7, 2008) (SR-BSE-2008-17) (notice of 
filing and immediate effectiveness of proposed rule change to amend 
Quarterly Options Series pilot program to permit the listing of 
additional series). In connection with any renewal or permanent 
approval of the Pilot Program, the Commission required the Exchange 
to include in its report an analysis of (1) the impact of the 
additional series on the Exchange's market and quote capacity, and 
(2) the implementation and effects of the delisting policy, 
including the number of series eligible for delisting during the 
period covered by the report, the number of series actually delisted 
during that period (pursuant to the delisting policy or otherwise), 
and documentation of any customer requests to maintain Quarterly 
Options Series strikes that were otherwise eligible for delisting.
---------------------------------------------------------------------------

    The Exchange represents that the Report and Addendum clearly 
demonstrate the extension of the Pilot Program for one year, through 
July 10, 2009, is warranted. The Exchange believes that there is 
sufficient investor interest and demand as reflected by strong trading 
volume. The Report and Addendum establish that the Pilot Program has 
provided investors with a flexible and valuable tool to manage risk 
exposure, minimize capital outlays, 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 
introduction of the Pilot Program. Finally, the Report and Addendum 
establish that the Pilot Program has not created capacity problems, nor 
should the proposed extension have an adverse impact on capacity.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\9\ in general, and Section 
6(b)(5) of the Act,\10\ in particular, in that it is designed to 
promote just and equitable principles of trade, to prevent fraudulent 
and manipulative acts, 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. The Exchange 
believes that an extension of the Pilot Program will result in a 
continuing benefit to investors, by allowing them to more closely 
tailor their investment decisions, and will allow the Exchange to 
further study investor interest in quarterly options.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b).
    \10\ 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 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 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

    The Exchange has designated the proposed rule change as one that: 
(1) Does not significantly affect the protection of investors or the 
public interest; (2) does not impose any significant burden on 
competition; and (3) does not become operative for 30 days from the 
date of filing, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest. 
Therefore, the foregoing rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \11\ and subparagraph (f)(6) of Rule 
19b-4 thereunder.\12\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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.
---------------------------------------------------------------------------

    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 and will promote 
competition because such waiver will allow the Exchange to continue the 
existing Pilot Program without interruption.\13\ Therefore, the 
Commission designates the proposal operative upon filing.
---------------------------------------------------------------------------

    \13\ 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).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate the 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,

[[Page 41140]]

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-BSE-2008-37 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-BSE-2008-37. 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 only 
information that you wish to make available publicly. All submissions 
should refer to File No. SR-BSE-2008-37 and should be submitted on or 
before August 7, 2008.
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-16348 Filed 7-16-08; 8:45 am]

BILLING CODE 8010-01-P