Document ID: SEC-2010-1840-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2010-12-06T05:00Z

[Federal Register Volume 75, Number 233 (Monday, December 6, 2010)]
[Notices]
[Pages 75716-75718]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-30432]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63397; File No. SR-BX-2010-084]

Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change as Modified 
by Amendment No. 1 To Extend, Through December 31, 2011, the Pilot 
Program That Permits Certain Classes To Be Quoted in Penny Increments 
on BOX

November 30, 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 November 24, 2010, NASDAQ OMX BX, Inc. (the ``Exchange'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I, II, and III below, which Items 
have been prepared by the self-regulatory organization. On November 30, 
2010, the Exchange submitted Amendment No. 1 to the proposed rule 
change. 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 Chapter V, Section 33 (Penny Pilot 
Program) of the Rules of the Boston Options Exchange Group, LLC 
(``BOX'') to extend, through December 31, 2011, the pilot program that 
permits certain classes to be quoted in penny increments on BOX 
(``Penny Pilot Program''). 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 Exchange proposes to extend the effective time period of the 
Penny Pilot Program on BOX that is currently scheduled to expire on 
December 31, 2010, for an additional year, through December 31, 
2011.\3\ The Penny Pilot Program permits certain classes to be

[[Page 75717]]

quoted in penny increments on BOX. The minimum price variation for all 
classes included in the Penny Pilot Program, except for the QQQQs, SPY 
and IWM, will continue to be $0.01 for all quotations in option series 
that are quoted at less than $3 per contract and $0.05 for all 
quotations in option series that are quoted at $3 per contract or 
greater. The QQQQs, SPY and IWM, will continue to be quoted in $0.01 
increments for all options series. The Exchange is not currently 
proposing any changes to the classes included within the Penny Pilot 
Program.
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    \3\ The Penny Pilot Program has been in effect on BOX since 
January 26, 2007. See Securities Exchange Act Release No. 55155 
(Jan. 23, 2007), 72 FR 4741 (Feb. 1, 2007) (SR-BSE-2006-49). The 
Penny Pilot Program was later extended through September 27, 2007. 
See Securities Exchange Act Release No. 56149 (July 26, 2007), 72 FR 
42450 (Aug. 2, 2007) (SR-BSE-2007-38). A subsequent rule filing by 
the Exchange on September 27, 2007 initiated a two-phased expansion 
of the Penny Pilot Program. See Securities Exchange Act Release No. 
56566 (Sept. 27, 2007), 72 FR 56400 (Oct. 3, 2007) (S-aRBSE-2007-
40). See also Securities Exchange Act Release No. 57566 (March 26, 
2008), 73 FR 18013 (April 2, 2008) (SR-BSE-2008-20). The Penny Pilot 
Program was then extended and expanded a number of times and is set 
to expire on December 31, 2010. See Securities Exchange Act Release 
Nos. 59629 (March 26, 2009), 74 FR 15021 (April 2, 2009) (SR-BX-
2009-017); 60213 (July 1, 2009), 74 FR 32998 (July 9, 2009) (SR-BX-
2009-032); 60886 (Oct. 27, 2009), 74 FR 56897 (Nov. 3, 2009) (SR-BX-
2009-067); 60950 (Nov. 6, 2009), 74 FR 58666 (Nov. 6, 2009) (SR-BX-
2009-069); 61456 (Feb. 1, 2010), 75 FR 6235 (Feb. 8, 2010) (SR-BX-
2010-011); 62039 (May 5, 2010), 75 FR 26313 (May 11, 2010) (SR-BX-
2010-032) and 62615 (July 30, 2010), 75 FR 47875 (Aug. 9, 2010) (SR-
BX-2010-052). The extension of the effective date is the only change 
to the Penny Pilot Program being proposed at this time.
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    Additionally, the Exchange proposes to amend Chapter V, Section 
33(b) of the BOX Rules to continue to be able to replace, on a semi-
annual basis, any Pilot Program classes that have been delisted. These 
delisted classes will be replaced by the next most actively traded 
multiply listed options classes that are not yet included in the Pilot 
Program, based on trading activity in the previous six months. The 
replacement classes may be added to the Pilot Program on the second 
trading day following January 1, 2011 and July 1, 2011.\4\ The 
replacement issues will be selected based on trading activity for the 
six-month period beginning June 1, 2010 and ending November 30, 2010, 
for the January 2011 replacement, and the six month period beginning 
December 1, 2010 and ending May 31, 2011 for the July 2011 
replacements. The Exchange will employ the same parameters to 
prospective replacement classes as approved and applicable under the 
Pilot Program, including excluding high-priced underlying securities.
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    \4\ The replacement classes will be announced to BOX 
Participants via Regulatory Circular and published by the Exchange 
on its Web site.
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    Further, BOX agrees to submit to the Commission such reports 
regarding the Penny Pilot Program as the Commission may request. Such 
reports may include: (1) Data and analysis on the number of quotations 
generated for options included in the Pilot Program; (2) an assessment 
of the quotation spreads for the options included in the Pilot Program; 
(3) an assessment of the impact of the Pilot Program on the capacity of 
BOX's automated systems; (4) data reflecting the size and depth of 
markets; and (5) any capacity problems or other problems that arose 
related to the operation of the Pilot Program and how the Exchange 
addressed them.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\5\ in general, and Section 
6(b)(5) of the Act,\6\ 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 proposed extension will allow the Penny Pilot 
Program to remain in effect on BOX without interruption.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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. Basis for Summary Effectiveness Pursuant to Section 19(b)(3) or 
for Accelerated Effectiveness Pursuant to Section 19(b)(2)

    This proposed rule change is filed pursuant to paragraph (A) of 
section 19(b)(3) of the Exchange Act \7\ and Rule 19b-4(f)(6) 
thereunder.\8\ This 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 after the date of the filing, or such shorter 
time as the Commission may designate if consistent with the protection 
of investors and the public interest.\9\
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ As required under Rule 19b-4(f)(6)(iii), BOX 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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    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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-BX-2010-084 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-2010-084. 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, on business days 
between the hours of 10 a.m. and 3 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-BX-2010-084 and should be 
submitted on or before December 27, 2010.

[[Page 75718]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-30432 Filed 12-3-10; 8:45 am]
BILLING CODE 8011-01-P