Document ID: SEC-2010-1151-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2010-07-29T04:00Z

[Federal Register: July 29, 2010 (Volume 75, Number 145)]
[Notices]               
[Page 44826-44828]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29jy10-89]                         

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SECURITIES AND EXCHANGE COMMISSION

Release No. 34-62553; File No. SR-BX-2010-050]

 
 Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Expand 
the $1 Strike Program on the Boston Options Exchange Facility

July 22, 2010.
    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 19, 2010, NASDAQ OMX BX, Inc. (the ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
the proposed rule change as described in Items I and II below, which 
Items have been prepared by the Exchange. The Exchange filed the 
proposed rule change 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 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 Chapter IV, Section 6 (Series of 
Options Contracts Open for Trading) of the Rules of the Boston Options 
Exchange Group, LLC (``BOX'') to expand the Exchange's $1 Strike Price 
Program (the ``$1 Strike Program'' or ``Program'') to allow the 
Exchange to select 150 individual stocks on which options may be listed 
at $1 strike price intervals. The text of the proposed rule change is 
available from the principal office of the Exchange, at the 
Commission's Public Reference Room, on the Commission's Web site at 
http://www.sec.gov, and also on the Exchange's Internet Web site at 
http://nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/Filings/.

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 purpose of this proposed rule change is to expand the $1 Strike 
Program (the ``Program'').\5\ The $1 Strike Program currently allows 
BOX to select a total of 55 individual stocks on which option series 
may be listed at $1 strike price intervals. In order to be eligible for 
selection into the Program, the underlying stock must close below $50 
in its primary market on the previous trading day. If selected for the 
Program, BOX may list strike prices at $1 intervals from $1 to $50, 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. BOX may also list $1 strikes on any other option class designated 
by another securities exchange that employs a similar Program under 
their respective rules. BOX may not list long-term option series 
(``LEAPS'') \6\ at $1 strike price intervals for any class selected for 
the Program, except as provided in Supplementary Material .02(c) to 
Chapter IV, Section 6 of the BOX Rules.\7\ BOX is also restricted from 
listing series with $1 intervals within $0.50 of an existing strike 
price in the same series, except that strike prices of $2, $3, and $4 
shall be permitted within $0.50 of an existing strike price for classes 
also selected to participate in the $0.50 Strike Program.\8\
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    \5\ The Commission approved the $1 Strike Price Program as a 
pilot in February 2004. See Securities Exchange Act Release No. 
49292 (Feb. 20, 2004), 69 FR 8993 (Feb. 26, 2004) (SR-BSE-2004-01). 
The Program was subsequently extended. See Securities Exchange Act 
Release No. 49806 (June 4, 2004), 69 FR 32640 (June 10, 2004) (SR-
BSE-2004-22) (extending the Program until June 5, 2005); Securities 
Exchange Act Release No. 51778 (June 2, 2005), 70 FR 33562 (June 8, 
2005) (SR-BSE-2005-18) (extending the Program until June 5, 2006); 
Securities Exchange Act Release No. 53855 (May 24, 2006), 71 FR 
30973 (May 31, 2006) (SR-BSE-2006-19) (extending the Program until 
June 5, 2007); Securities Exchange Act Release No. 55684 (Apr. 30, 
2007), 72 FR 26188 (May 8, 2007) (SR-BSE-2007-17) (extending the 
Program until June 5, 2008). The Program was subsequently expanded 
and permanently approved in 2008. See Securities Exchange Act 
Release No. 57302 (Feb. 11, 2008), 73 FR 8913 (Feb. 15, 2008) (SR-
BSE-2008-08). The Pilot Program was last expanded in 2009. See 
Securities Exchange Act Release No. 59589 (Mar. 17, 2009), 73 FR 
8913 (Mar. 24, 2009) (SR-BSE-2009-16).
    \6\ LEAPS are long-term options that have from twelve to thirty-
nine months from the time they are listed until expiration. See 
Chapter IV, Section 8(a) Long-Term Equity Option Series 
(LEAPS[reg]).
    \7\ Supplementary Material .02(c) to Chapter IV, Section 6 of 
the BOX Rules states that the Exchange may list $1 strike prices up 
to $5 in LEAPS in up to 200 option classes in individual stocks. See 
Securities Exchange Act Release No. 61041 (Nov. 20, 2009) 75 FR 
62623 (Nov. 30, 2009) (SR-BSE-2009-073).
    \8\ Regarding the $0.50 Strike Program, which allows $0.50 
strike price intervals for options on stocks trading at or below 
$3.00, see Supplementary Material .02 to Chapter IV, Section 6(a) 
and Securities Exchange Act Release No. 60814 (Oct. 13, 2009), 74 FR 
53535 (Oct. 19, 2009) (SR-BSE-2009-063). See also Securities 
Exchange Act Release No. 61811 (Mar. 31, 2010), 75 FR 17802 (April 
7, 2010) (SR-BSE-2010-025) (permitting concurrent listing of $3.50 
and $4 strikes for classes in the $0.50 Strike and $1 Strike 
Programs).

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[[Page 44827]]

    The Exchange now proposes to expand the Program to allow BOX to 
select a total of 150 individual stocks on which option series may be 
listed at $1 strike price intervals. The existing restrictions on 
listing $1 strikes would continue, i.e., 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 BOX is restricted 
from listing any series that would result in strike prices being $0.50 
apart (unless an option class is selected to participate in both the $1 
Strike Program and the $0.50 Strike Program).
    As stated in the filings establishing BOX's Program and in 
subsequent extensions and expansions of the Program,\9\ BOX believes 
that $1 strike price intervals provide investors with greater 
flexibility in the trading of equity options that overlie lower price 
stocks by allowing investors to establish equity options positions that 
are better tailored to meet their investment objectives.
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    \9\ See supra note 5.
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    BOX believes that market conditions have led to an increase in the 
number of securities trading below $50 warranting the proposed 
expansion of the $1 Strike Program.\10\ In addition, BOX notes that 
this filing is based on rules of other options exchanges, such as, 
NASDAQ OMX PHLX, Inc (``PHLX''), Chicago Board Options Exchange 
(``CBOE''), International Securities Exchange, LLC (``ISE''), NYSE 
Arca, Inc. (``NYSE Arca''), NYSE Amex LLC (``NYSE Amex''), and NASDAQ 
Options Market (``NOM'').\11\ With regard to previous expansions of the 
Program, the Commission has approved proposals from the options 
exchanges that employ a $1 Strike Program in lockstep.
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    \10\ See, e.g., Securities Exchange Act Release No. 59589 (Mar. 
17, 2009), 73 FR 8913 (Mar. 24, 2009) (SR-BSE-2009-16) (referencing 
the more than five-fold increase in the number of individual stocks 
on which options may be listed at $1 intervals).
    \11\ See Securities Exchange Act Release No. 62420 (June 30, 
2010), 75 FR 39593 (July 9, 2010) (SR-Phlx-2010-72); Securities 
Exchange Act Release No. 62443 (July 2, 2010), 75 FR 39608 (July 9, 
2010) (SR-CBOE-2010-64); Securities Exchange Act Release No. 62442 
(July 2, 2010), 75 FR 39597 (July 9, 2010) (SR-ISE-2010-64); 
Securities Exchange Act Release No. 62450 (July 2, 2010), 75 FR 
39712 (July 12, 2010) (SR-NYSEArca-2010-66); Securities Exchange Act 
Release No. 62449 (July 2, 2010) (SR-NYSEAmex-2010-67); Securities 
Exchange Act Release No. 62451 (July 6, 2010) (SR-NASDAQ-2010-83).
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    The Exchange notes that, in addition to options classes that are 
trading pursuant to the $1 strike programs of options exchanges, there 
are also options trading at $1 strike intervals on BOX on over 95 
exchange-traded fund shares (``ETFs'') and exchange-traded notes 
(ETNs''),\12\ ETF and ETN options trading at $1 intervals have not, 
however, negatively impacted the system capacity of BOX or OPRA.
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    \12\ See Supplementary Material .01 to Chapter IV, Section 6 of 
the BOX Rules (allowing $1 strike price intervals for ETF and ETN 
options where the strike price is $200 or less).
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    With regard to the impact of this proposal on system capacity, BOX 
has analyzed its capacity and the Exchange represents that it and OPRA 
have the necessary systems capacity to handle the potential additional 
traffic associated with the listing and trading of an expanded number 
of series in the $1 Strike Program.
    BOX believes that the $1 Strike Program has provided investors with 
greater trading opportunities and flexibility and the ability to more 
closely tailor their investment and risk management strategies and 
decisions to the movement of the underlying security. Furthermore, BOX 
has not detected any material proliferation of illiquid options series 
resulting from the narrower strike price intervals. For these reasons, 
BOX requests an expansion of the current Program and the opportunity to 
provide investors with additional strikes for investment, trading, and 
risk management purposes.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\13\ in general, and Section 
6(b)(5) of the Act,\14\ in particular, in that it is designed to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism for a free and open market and a national market 
system and, in general, to protect investors and the public interest. 
In particular, the Exchange believes that expanding the current $1 
Strike Program will result in a continuing benefit to investors by 
giving them more flexibility to closely tailor their investment 
decisions in a greater number of securities.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 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 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

    Because the foregoing proposed rule change does not significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not 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 \15\ and Rule 19b-
4(f)(6) thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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 
Commission has waived the five-day pre-filing requirement in this 
case.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiver of the operative 
delay is consistent with the protection of investors and the public 
interest because the proposal is substantially similar to that of 
another exchange that has been approved by the Commission.\17\ 
Therefore, the Commission designates the proposal operative upon 
filing.\18\
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    \17\ See Securities Exchange Act Release No. 62420 (June 30, 
2010), 75 FR 39593 (July 9, 2010) (SR-Phlx-2010-72) (order approving 
expansion of $1 strike program to 150 classes).
    \18\ 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).
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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.

[[Page 44828]]

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-BX-2010-050 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-BX-2010-050. 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 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 
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-BX-2010-050 and should be 
submitted on or before August 19, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-18572 Filed 7-28-10; 8:45 am]
BILLING CODE 8010-01-P