Document ID: SEC-2013-1385-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange LLC
Posted Date: 2013-08-05T04:00Z

[Federal Register Volume 78, Number 150 (Monday, August 5, 2013)]
[Notices]
[Pages 47476-47478]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-18759]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70070; File No. SR-BOX-2013-037]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend BOX Rule 4170 (Options Communications)

July 30, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on July 15, 2013, BOX Options Exchange LLC 
(``BOX'' or the ``Exchange'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I and II below, which Items have been substantially prepared 
by the Exchange. 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 BOX Rule 4170 (Options 
Communications) to conform the rule to changes recently made by the 
Financial Industry Regulatory Authority, Inc. (``FINRA'') to its 
corresponding rule.\3\ 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

[[Page 47477]]

Exchange's Internet Web site at http://boxexchange.com.
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    \3\ See Exchange Act Release No. 68650 (Jan. 14, 2013), 78 FR 
4182 (Jan. 18, 2013) (Notice of Immediate Effectiveness of SR-FINRA-
2013-001).
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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 proposed to update Exchange Rule 4170 (Options 
Communications) to conform the rule to changes recently made by FINRA 
to its corresponding rule.\4\ This filing is also based on a proposal 
recently submitted by Chicago Board Options Exchange, Inc. (``CBOE'') 
and approved by the Commission.\5\
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    \4\ See Exchange Act Release No. 68650 (Jan. 14, 2013), 78 FR 
4182 (Jan. 18, 2013) (Notice of Immediate Effectiveness of SR-FINRA-
2013-001). The Exchange also proposes certain changes in Rule 4170 
to conform with aspects of the FINRA rule that predated the recent 
FINRA amendment and were not changed by that amendment.
    \5\ See Exchange Act Release No. 69807 (June 20, 2013), 78 FR 
38423 (June 26, 2013) (Order Approving of SR-CBOE-2013-043).
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    The proposed changes to BOX Rule 4170 (Options Communications) are 
designed to alert Participants to their requirements with respect to 
Options Communications while further regulating all communications for 
compliance with BOX Rules and the Act.
    First, the proposed rule change would amend BOX Rule 4170(a) to 
reduce the number of defined categories of communication from six (in 
the current rule) to three. The proposed three categories of 
communications are: Retail communications, correspondence, and 
institutional communications. Current definitions of ``sales 
literature,'' ``advertisement,'' and ``independently prepared reprint'' 
are combined into a single category of ``retail communications.'' Thus, 
the Exchange proposes to define ``retail communication'' as ``any 
written (including electronic) communication that is distributed or 
made available to more than 25 retail investors within any 30-calendar-
day period.'' The Exchange also proposes to update the definition of 
``correspondence'' to ``any written (including electronic) 
communication distributed or made available by a Participant to 25 or 
fewer retail customers within any 30-calendar-day period.'' Finally, 
the Exchange proposes to define, ``institutional communication'' to 
include written (including electronic) communications that are 
distributed or made available only to institutional investors.
    Second, the Exchange proposes to amend Rule 4170(b), ``Approval by 
Registered Options Principal'' to replace the phrase ``advertisements, 
sales literature, and independently prepared reprints'' in Rule 
4170(b)(i) with the new proposed term, ``retail communications.''
    Under proposed Rule 4170(b)(ii), correspondence would ``need not be 
approved by a Registered Options Principal prior to use'' but would be 
subject to the supervision and review requirements of BOX Rule 4030. 
The current rule requires principal approval of correspondence that is 
distributed to 25 or more existing retail customers within a 30-
calendar-day period that makes any financial or investment 
recommendation or otherwise promotes the product or service of a 
Participant. Under proposed Rule 4170(b), such communications would be 
considered retail communications and therefore would be subject to the 
principal approval requirement. As such, the proposed change would not 
substantively change the scope of options communications that would 
require principal approval.
    Third, the Exchange proposes to modify the required approvals of 
``Institutional communications'' by adding that a Participant shall 
``establish written procedures that are appropriate to its business, 
size, structure, and customers for review by a Registered Options 
Principal of institutional communications used by the Participant.''
    Fourth, the Exchange proposes to amend Rule 4170(c) to replace the 
phrase ``advertisements, sales literature, and independently prepared 
reprints'' with the new proposed term, ``retail communications.'' The 
Exchange also proposes to further exempt options disclosure documents 
and prospectuses from Exchange review as other requirements apply to 
these documents under the Securities Act of 1933 (the ``Securities 
Act'').
    Fifth, the Exchange proposes to specify in Rule 4170(d) that Order 
Flow Providers (``OFP'') or associated persons may not use any options 
communications that ``constitute a prospectus'' unless the 
communications meet the requirements of the Securities Act. Finally, 
the Exchange proposes to move and slightly modify Rule 4170(d) to state 
that any statement made referring to ``potential opportunities or 
advantages presented by options'' must also be accompanied by a 
statement identifying the potential risks posed.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\6\ in general, and Section 
6(b)(5) of the Act,\7\ 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5). Form 19b-4 as filed by BOX 
inadvertently referred to Section 6(b)(4). This change was approved 
per email by Lisa Fall of BOX, in an email from Kristen Tierney 
(BOX) to Alicia Goldin (SEC) on July 29, 2013 (``July 29 email'').
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    In particular, the Exchange believes the proposed rule changes will 
help Participants that are also members of FINRA and/or CBOE to comply 
with their obligations regarding options communications by better 
aligning the Exchange's requirements with those of FINRA and CBOE.\8\ 
In addition, the Exchange believes that the proposed rule change will 
help ensure that investors are protected from potentially false or 
misleading communications with the public distributed by Participants.
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    \8\ This statement was modified from the Form 19b-4 filed by 
BOX, per the July 29 email, supra note 7.
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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 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 being proposed is 
substantially similar to a filing submitted by the CBOE and recently 
approved by the Commission.\9\ The Exchange believes that establishing 
uniform rules regarding Options Communications will enable

[[Page 47478]]

Participants to more efficiently carry out their supervisory and other 
compliance obligations.\10\
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    \9\ See supra, note 5.
    \10\ This statement was modified from the Form 19b-4 filed by 
BOX, per the July 29 email, supra note 7.
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    Specifically, the proposed rule change will merely bring clarity 
and consistency to Exchange Rules. The Exchange does not believe the 
proposed rule change will impose any burden on any intra-market 
competition as it applies to all Participants. In addition, the 
Exchange does not believe the proposed rule filing will bring any 
unnecessary burden on inter-market competition as it is consistent with 
the FINRA ``Options Communications'' rule.\11\
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    \11\ 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

    BOX has filed the proposed rule change pursuant to Section 
19(b)(3)(A) \12\ of the Act and Rule 19b-4(f)(6) thereunder.\13\ 
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, it has become effective pursuant to Section 
19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange 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 satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \14\ normally 
does not become operative for 30 days after the date of filing. 
However, pursuant to Rule 19b-4(f)(6)(iii) \15\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. BOX has asked the 
Commission to waive the 30-day operative delay so that the proposal may 
become operative immediately upon filing.
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest, as 
it will it will ensure fair competition among the exchanges by allowing 
the Exchange to conform with changes recently made by FINRA. For these 
reasons, the Commission designates the proposed rule change to be 
operative upon filing.\16\
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    \16\ For purposes 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 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-2013-037 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-BOX-2013-037. 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, on official business days between 
the hours of 10:00 a.m. and 3:00 p.m., located at 100 F Street NE., 
Washington, DC 20549. 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-BOX-2013-037 and 
should be submitted on or before August 26, 2013.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-18759 Filed 8-2-13; 8:45 am]
BILLING CODE 8011-01-P