Document ID: SEC-2012-2006-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange, LLC
Posted Date: 2012-12-06T05:00Z

[Federal Register Volume 77, Number 235 (Thursday, December 6, 2012)]
[Notices]
[Pages 72895-72897]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-29453]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68326; File No. SR-BOX-2012-018]

Self-Regulatory Organizations; BOX Options Exchange, LLC; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change To 
Increase the Maximum Term for LEAPS to Fifteen Years

November 30, 2012.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934

[[Page 72896]]

(``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that 
on November 19, 2012, BOX Options Exchange LLC (the ``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 Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 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 its rules to increase the maximum 
term for Long-Term Equity Options Series (``LEAPS'') to fifteen years. 
The text of the proposed rule change is available from the principal 
office of the Exchange, on the Exchange's Internet Web site at http://boxexchange.com, 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Long-term equity and index option series (LEAPS) are similar to 
standard options but have maturities that may expire from 3 to 5 years, 
respectively, post initial listing. The purpose of the proposed rule 
change is to increase the maximum term for all LEAPS. Currently, the 
maximum term on BOX for equity LEAPS is 39 months and the maximum term 
for index LEAPS is 60 months.
    Specifically, the Exchange is proposing to increase the maximum 
term for all LEAPS to 180 months (fifteen years). The Exchange 
understands that market participants currently enter into over-the-
counter (``OTC'') positions that have longer dated expirations than are 
currently available on BOX. The Exchange would like to accommodate the 
needs of BOX Options Participants by listing LEAPS with longer dated 
expirations. BOX is currently unable to do so because of the existing 
term limitations set forth in the Exchange Rules.
    The Exchange believes that expanding the eligible term for all 
LEAPS to 180 months is important and necessary to BOX's efforts to 
offer products in an exchange-traded environment that compete with OTC 
products. The Exchange believes that LEAPS provide market participants 
and investors with a competitive comparable alternative to the OTC 
market in long-term options, which can take on contract characteristics 
similar to LEAPS but are not subject to the same maximum term 
restriction. By expanding the eligible term for LEAPS, market 
participants will now have greater flexibility in determining whether 
to execute their long-term options in an exchange environment or in the 
OTC market. The Exchange believes that market participants can benefit 
from being able to trade these long-term options in an exchange 
environment in several ways, including, but not limited to the 
following: (1) Enhanced efficiency in initiating and closing out 
positions; (2) increased market transparency; and (3) heightened 
contra-party creditworthiness due to the role of The Options Clearing 
Corporation (``OCC'') as issuer and guarantor of LEAPS.
    The Exchange understands that quote traffic is always an issue with 
the introduction of a new product or a revision to the terms of a 
contract, such as a longer dated LEAPS option. The Exchange, however, 
does not expect there to be a significant increase to quote traffic 
since the Exchange anticipates listing longer dated LEAPS in response 
to specific market demand and does not expect to significantly populate 
expirations. In addition, the Exchange notes that certain liquidity 
providers are not subject to quoting obligations for LEAPs, which will 
assist with quote traffic mitigation.
    Additionally, the OCC has confirmed that it can configure its 
systems to support LEAPS that have a maximum term of fifteen years (180 
months).
    Finally, the Exchange is making technical, non-substantive changes 
to Rule 5070 to delete ``[reg]'' symbols
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\4\ in general, and Section 
6(b)(5) of the Act,\5\ in particular, that the rules of an exchange be 
designed to promote just and equitable principles of trade, to prevent 
fraudulent and manipulative acts, to remove impediments to and to 
perfect the mechanism for a free and open market and a national market 
system, and, in general, to protect investors and the public interest.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
promote just and equitable principles of trade in that the availability 
of LEAPS with longer dated expirations will give market participants an 
alternative to trading similar products in the OTC market. Trading a 
product in an exchange traded environment (that is currently being used 
in the OTC market) will also enable the Exchange to compete more 
effectively with the OTC market.
    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that it will 
hopefully lead to the migration of options currently trading in the OTC 
market to trading on BOX. Also, any migration to BOX from the OTC 
market will result in increased market transparency.
    Additionally, the Exchange believes that the proposed rule change 
is designed to remove impediments to and to 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 that it should create 
greater trading and hedging opportunities and flexibility. The proposed 
rule change should also result in enhanced efficiency in initiating and 
closing out positions and heightened contra-party creditworthiness due 
to the role of OCC as issuer and guarantor of LEAPS. Further, the 
proposal will result in increased competition by permitting the 
Exchange to offer products that are currently used in the OTC market.

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.

[[Page 72897]]

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 filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \6\ and Rule 19b-4(f)(6) thereunder.\7\ 
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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-
4(f)(6)(iii) thereunder.\9\
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    \6\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \7\ 17 CFR 240.19b-4(f)(6).
    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6)(iii). 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 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. The Exchange has satisfied this pre-filing requirement.
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    The Exchange notes that the proposal is substantially similar to a 
rule change proposed by the Chicago Board Options Exchange Incorporated 
(``CBOE''), which was recently approved by the Commission.\10\ The 
Exchange believes that this proposed rule change does not raise any new 
or unique substantive issues from those raised in the CBOE proposal.
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    \10\ See Securities Exchange Act Release No. 68164 (November 6, 
2012), 77 FR 67723 (November 13, 2012) (Order Approving CBOE 
Proposed Rule Change to Increase the Maximum Term for LEAPS to 
Fifteen Years) (SR-CBOE-2012-071).
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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.

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-2012-018 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-2012-018. 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-2012-018 and should be 
submitted on or before December 27, 2012.

For the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-29453 Filed 12-5-12; 8:45 am]
BILLING CODE 8011-01-P