Document ID: SEC-2015-0089-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange LLC
Posted Date: 2015-01-14T05:00Z

[Federal Register Volume 80, Number 9 (Wednesday, January 14, 2015)]
[Notices]
[Pages 1976-1979]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-00378]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74016; File No. SR-BOX-2015-01]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
IM-5050-6 to BOX Rule 5050 (Short Term Option Series Program)

January 8, 2015.
    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 7, 2015, BOX Options Exchange LLC (the ``Exchange'') filed 
with the Securities

[[Page 1977]]

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 IM-5050-6 to BOX Rule 5050 (Short 
Term Option Series Program) to extend current $0.50 strike price 
intervals in non-index options to short term options with strike prices 
less than $100. 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://boxexchange.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 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 Exchange proposes to amend IM-5050-6 to BOX Rule 5050 to extend 
current $0.50 strike price intervals in non-index options to short term 
options with strike prices less than $100. This is a competitive filing 
that is based on a proposal recently submitted by the International 
Securities Exchange, LLC (``ISE'').\3\
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    \3\ See Securities Exchange Act Release No. 73633 (November 18, 
2014), 79 FR 69974 (November 24, 2014) (Notice of Filing SR-ISE-
2014-52).
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    The Exchange proposes to amend its rules governing the Short Term 
Option Series Program to introduce finer strike price intervals for 
certain short term options. In particular, the Exchange proposes to 
amend IM-5050-6 to extend $0.50 strike price intervals in non-index 
options to short term options with strike prices less than $100 instead 
of the current $75. This proposed change is intended to eliminate 
gapped strikes between $75 and $100 that result from conflicting strike 
price parameters under the Short Term Option Series and $2.50 Strike 
Price Programs as described in more detail below.
    Under the Exchange's rules, the Exchange may list short term 
options in up to fifty option classes in addition to option classes 
that are selected by other securities exchanges that employ a similar 
program under their respective rules.\4\ On any Thursday or Friday that 
is a business day, the Exchange may list short term option series in 
designated option classes that expire at the close of business on each 
of the next five Fridays that are business days and are not Fridays in 
which monthly or quarterly options expire.\5\ These short term option 
series trade in $0.50, $1, or $2.50 strike price intervals depending on 
the strike price and whether the option trades in dollar increments in 
the related monthly expiration.\6\ Specifically, short term options in 
non-index option classes admitted to the Short Term Options Series 
Program currently trade in: (1) $0.50 or greater intervals for strike 
prices less than $75, or for option classes that trade in one dollar 
increments in the related monthly expiration option; (2) $1 or greater 
intervals for strike prices that are between $75 and $150; and (3) 
$2.50 or greater intervals for strike prices above $150.\7\
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    \4\ See IM-5050-6(b)(1) to Rule 5050.
    \5\ See IM-5050-6(a) to Rule 5050.
    \6\ See IM-5050-6(b)(5) to Rule 5050.
    \7\ Id.
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    The Exchange also operates a $2.50 Strike Price Program that 
permits the Exchange to select up to sixty options classes on 
individual stocks to trade in $2.50 strike price intervals, in addition 
to option classes selected by other securities exchanges that employ a 
similar program under their respective rules.\8\ Monthly expiration 
options in classes admitted to the $2.50 Strike Price Program trade in 
$2.50 intervals where the strike price is (1) greater than $25 but less 
than $50; or (2) between $50 and $100 if the strikes are no more than 
$10 from the closing price of the underlying stock in its primary 
market on the preceding day.\9\ These strike price parameters conflict 
with strike prices allowed for short term options as dollar strikes 
between $75 and $100 otherwise allowed under the Short Term Option 
Series Program may be within $0.50 of strikes listed pursuant to the 
$2.50 Strike Price Program. In order to remedy this conflict, the 
Exchange proposes to extend the $0.50 or greater strike price intervals 
currently allowed for short term options with strike prices less than 
$75 to short term options with strike prices less than $100. With this 
proposed change, short term options in non-index option classes will 
trade in: (1) $0.50 or greater intervals for strike prices less than 
$100, or for option classes that trade in one dollar increments in the 
related monthly expiration option; (2) $1 intervals for strike prices 
that are between $100 and $150; and (3) $2.50 or greater intervals for 
strike prices above $150.
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    \8\ See IM-5050-3 to Rule 5050.
    \9\ Id. The term ``primary market'' is defined in Rule 
100(a)(49) as the principal market in which an underlying security 
is traded.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Securities Exchange Act of 1934 
(the ``Act''),\10\ in general, and Section 6(b)(5) of the Act,\11\ in 
particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, 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.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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    During the month prior to expiration, the Exchange is permitted to 
list related monthly option contracts in the narrower strike price 
intervals available for short term option series.\12\ After 
transitioning to short term strike price intervals, however, monthly 
options that trade in $2.50 intervals between $50 and $100 under the 
$2.50 Strike Price Program, trade with dollar strikes between $75 and 
$150. Due to the overlap of $1 and $2.50 intervals, the Exchange cannot 
list certain dollar strikes between $75 and $100 that conflict with the 
prior $2.50 strikes. For example, if the Exchange initially listed 
monthly options on ABC with $75, $77.50, and $80 strikes, the Exchange 
could list the $76 and $79 strikes when these transition to short term 
intervals. The Exchange would not be permitted to list the $77 and $78 
strikes, however, as these are $0.50 away from the $77.50 strike 
already listed on the Exchange. This creates gapped strikes between $75 
and $100, where investors are not able to trade otherwise allowable 
dollar strikes on the Exchange. Similarly, these conflicting strike 
price parameters

[[Page 1978]]

create issues for investors who want to roll their positions from 
monthly to weekly expirations. In the example above, for instance, an 
investor that purchased a monthly ABC option with a $77.50 strike price 
would not be able to roll that position into a later short term 
expiration with the same strike price as that strike is unavailable 
under current Short Term Option Series Program rules. Permitting $0.50 
intervals for short term options up to $100 would remedy both of these 
issues as strikes allowed under the $2.50 Strike Price Program would 
not conflict with the finer $0.50 strike price interval.
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    \12\ See IM-5050-6(b)(5) to Rule 5050.
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    The Short Term Option Series Program has been well-received by 
market participants and the Exchange believes that introducing finer 
strike price intervals for short term options with strike prices 
between $75 and $100, and thereby eliminating the gapped strikes 
described above, will benefit these market participants by giving them 
more flexibility to closely tailor their investment and hedging 
decisions.
    With regard to the impact of this proposal on system capacity, the 
Exchange has analyzed its capacity and represents that it and the 
Options Price Reporting Authority (``OPRA'') have the necessary systems 
capacity to handle any potential additional traffic associated with 
this proposed rule change. The Exchange believes that its members will 
not have a capacity issue as a result of this proposal. The Exchange 
also represents that it does not believe this expansion will cause 
fragmentation of liquidity.

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. In this regard and as indicated 
above, the Exchange notes that the rule change is being proposed as a 
competitive response to a filing submitted by ISE.\13\ To the contrary, 
the Exchange believes that the proposed rule change will result in 
additional investment options and opportunities to achieve the 
investment objectives of market participants seeking efficient trading 
and hedging vehicles, to the benefit of investors, market participants, 
and the marketplace in general. Additionally, the Exchange believes 
that the proposed rule change is necessary to permit fair competition 
among the options exchanges with respect to Short Term Option Series 
Programs.
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    \13\ See supra, note 3.
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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 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 from the date on which it was filed, or such shorter time as the 
Commission may designate, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6) 
thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Exchange stated that waiver of this requirement will ensure 
fair competition among exchanges by allowing the Exchange to extend the 
$0.50 strike price intervals currently allowed for short term options 
with strike prices less than $75 to short term options with strike 
prices less than $100 contemporaneously with ISE. For this reason, the 
Commission believes that the proposed rule change presents no novel 
issues and that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest; and will allow the 
Exchange to remain competitive with other exchanges. Therefore, the 
Commission designates the proposed rule change to be operative upon 
filing.\16\
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    \16\ 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 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

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 email to rule-comments@sec.gov. Please include 
File Number SR-BOX-2015-01 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-BOX-2015-01. This file 
number should be included on the subject line if email 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 Web site 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 
10:00 a.m. and 3:00 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-BOX-2015-01 and should be 
submitted on or before February 4, 2015.

[[Page 1979]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-00378 Filed 1-13-15; 8:45 am]
BILLING CODE 8011-01-P