Document ID: SEC-2008-0531-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Boston Stock Exchange, Inc
Posted Date: 2008-04-07T04:00Z

[Federal Register: April 7, 2008 (Volume 73, Number 67)]
[Notices]               
[Page 18831-18833]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07ap08-105]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57598; File No. SR-BSE-2008-19]

 
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Position and Exercise Limits on the Boston Options Exchange 
Facility

April 1, 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 March 18, 2008, the Boston Stock Exchange, Inc. (``Exchange'' or 
``BSE'') filed with the Securities and Exchange Commission

[[Page 18832]]

(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been substantially 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 proposes to amend the rules of the Boston Options 
Exchange (``BOX'') to increase the position and exercise limits 
applicable to options on the DIAMONDS Trust, Series 1 (``DIA''). The 
text of the rule proposal is available on the Exchange's Web site 
(http://www.bostonstock.com), at the offices 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 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 amend the BOX rules pertaining to 
position and exercise limits for options on DIA. The Exchange proposes 
to increase position and exercise limits for options on DIA to 300,000 
contracts on the same side of the market. The Commission previously 
approved a similar proposal of the Chicago Board Options Exchange 
(``CBOE'').\5\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 47346 (February 11, 
2003) 68 FR 8316 (February 20, 2003) (SR-CBOE-2002-26) (approving an 
increase in the position limits and exercise limits to 300,000 for 
DIA options). The Commission stated that ``given the surveillance 
capabilities of the [CBOE] and the depth and liquidity in both the 
DIA options and the underlying cash market in DIAs, the Commission 
believes it is permissible to significantly raise position and 
exercise limits for DIA options without risk of disruption to the 
options or underlying cash markets.'' The Commission also stated 
that ``financial and reporting requirements * * * should allow 
[CBOE] to detect and deter trading abuses arising from the increased 
position and exercise limits, and will also allow [CBOE] to monitor 
large positions in order to identify instances of potential risk and 
to assess additional margin and/or capital charges, if deemed 
necessary.''
---------------------------------------------------------------------------

    The Exchange also recently made permanent its increased position 
and exercise limits for certain equity options on BOX, which were in 
effect on a pilot basis.\6\ The Exchange stipulated, as part of its 
proposal for such permanent approval, that ``its surveillance 
procedures and reporting procedures, in conjunction with the financial 
requirements and risk management review procedures already in place at 
the clearing firms and the Options Clearing Corporation, [would] serve 
to adequately address any concerns the Commission may have with respect 
to account(s) engaging in any manipulative schemes or assuming too high 
a level of risk exposure.'' \7\ These representations also apply to the 
current proposal to increase the position and exercise limits for 
options on DIA. The Exchange now seeks to increase the position and 
exercise limits for options on DIA on BOX to the level that such limits 
are in effect on CBOE (300,000 contracts on the same side of the 
market).
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 57414 (March 3, 
2008) 73 FR 12481 (March 7, 2008) (SR-BSE-2008-12).
    \7\ Id.
---------------------------------------------------------------------------

    The Exchange asserts that the justifications behind the 
Commission's approval of CBOE's proposal should support the same 
increased position and exercise limits on options on DIA on BOX. 
Specifically, the Exchange believes that the ``structure of the DIA 
options and the considerable liquidity of both the underlying cash and 
options market for DIA options lessen the opportunity for manipulation 
of this product and disruption in the underlying market that a lower 
position limit may protect against.'' \8\ The Exchange believes that 
the reporting requirements imposed under the BOX rules will help 
protect against potential manipulation.\9\ Additionally, the Exchange 
believes that such an increase in position and exercise limits on 
options on DIA on BOX is also required for competitive purposes as well 
as for purposes of consistency and uniformity among the competing 
options exchanges. This, taken in conjunction with the permanent 
establishment of other increased position and exercise limits for 
certain equity options on BOX,\10\ supports the Exchange's proposal 
related to such increased position and exercise limits applicable to 
DIA.
---------------------------------------------------------------------------

    \8\ See Securities Exchange Act Release No. 47346, supra note 5.
    \9\ See BOX Rules, Ch. III, Sec. 10.
    \10\ See, e.g., Securities Exchange Act Release No. 57414, supra 
note 6.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of section 6(b) of the Act \11\ in general, and section 
6(b)(5) of the Act \12\ 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. Specifically, 
the Exchange believes that the structure of the DIA options and the 
considerable liquidity of the market for DIA options diminishes the 
opportunity for manipulation of this product and disruption in the 
underlying market that a lower position limit may protect against.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 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 \13\ and

[[Page 18833]]

subparagraph (f)(6) of Rule 19b-4 thereunder.\14\ The Exchange notes 
that the proposed rule change is based on a similar proposal previously 
approved by the Commission,\15\ and does not raise any novel issues. 
Additionally, the Exchange asserts that the proposed rule change is 
necessary to eliminate any confusion among members of multiple 
exchanges regarding position and exercise limits applicable to options 
on DIA and for purposes of maintaining a fair and orderly market.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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.
    \15\ See Securities Exchange Act Release No. 47346, supra note 
5.
---------------------------------------------------------------------------

    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 Exchange states that waiving the operative 
delay will allow the proposed increase in the position and exercise 
limits applicable to options on DIA on BOX to be put into effect 
immediately, which will align BOX's DIA limits with the DIA limits 
applicable to members of other options exchange(s), thereby promoting 
conformity and uniformity in the rules of the several options 
exchanges.
    The Commission believes that waiving the 30-day operative delay of 
the Exchange's proposal is consistent with the protection of investors 
and the public interest.\16\ Therefore, the Commission designates the 
proposal to be operative upon filing.
---------------------------------------------------------------------------

    \16\ 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, 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-2008-19 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-2008-19. 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 Number SR-BSE-2008-19 and should be submitted on 
or before April 28, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

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

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-7189 Filed 4-4-08; 8:45 am]

BILLING CODE 8011-01-P