Document ID: SEC-2011-1812-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2011-11-23T05:00Z

[Federal Register Volume 76, Number 226 (Wednesday, November 23, 2011)]
[Notices]
[Pages 72490-72492]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30197]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65773; File No. SR-BX-2011-075]

 Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the BOX Rules To Expand the Short Term Option Series Program

November 17, 2011.
    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 10, 2011, NASDAQ OMX BX, Inc. (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 Exchange has designated the 
proposed rule change as constituting a non-controversial rule change 
under Rule 19b-4(f)(6) under the Act,\3\ which renders the proposal 
effective upon filing with the Commission. 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\ 17 CFR 240.19b-4.
    \3\ 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 the Rules of the Boston Options 
Exchange Group, LLC (``BOX'') to expand the Short Term Option Series 
Program.

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 purpose of this proposed rule change is to amend Supplementary 
Material .07 to Chapter IV, Section 6 (Series of Options Open for 
Trading) and Supplementary Material .02 to Chapter XIV, Section 10 
(Terms of Index Options Contracts) to expand the Short Term Option 
Series Program (``Weeklys Program'') \4\ so that BOX may select twenty-
five option classes to participate in the Weeklys Program \5\ and list 
a total of 30 Short Term Option Series (``Weekly Series'') for each 
option class that participates in the Weeklys Program.
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    \4\ The Exchange adopted the Weeklys Program on July 15, 2010. 
See Securities Exchange Act Release No. 62505 (July 15, 2010), 75 FR 
42792 (July 22, 2010) (SR-BX-2010-047).
    \5\ The Exchange previously increased the total number of option 
classes that may participate in the Weeklys Program from 5 to 
fifteen (15). See Securities Exchange Act Release No. 64009 (March 
2, 2011), 76 FR 12771 (March 8, 2011) (SR-BX-2011-014).
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    The Weeklys Program is codified in Supplementary Material .07 to 
Chapter IV, Section 6 and Supplementary Material .02 to Chapter XIV, 
Section 10. These rules state that after an option class has been 
approved for listing and trading on BOX, BOX may open for trading on 
any Thursday or Friday that is a business day series of options on no 
more than fifteen option classes that expire on the Friday of the 
following business week that is a business day. In addition to the 
fifteen-option class limitation, there is also a limitation that

[[Page 72491]]

no more than twenty series for each expiration date in those classes 
that may be opened for trading.\6\ Furthermore, the strike price of 
each short term option has to be fixed with approximately the same 
number of strike prices being opened above and below the value of the 
underlying security at about the time that the Weekly options are 
initially opened for trading on BOX, and with strike prices being 
within thirty percent (30%) above or below the closing price of the 
underlying security from the preceding day. BOX does not propose any 
changes to the Weeklys Program limitations other than to increase from 
fifteen to twenty-five the number of option classes that may be opened 
pursuant to the Weeklys Program and increase from 20 to 30 the number 
of Weekly Series that may be opened for each class of option selected 
to participate in the Weeklys Program.
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    \6\ However, if BOX opens less than twenty (20) short term 
options for a Short Term Option Expiration Date, additional series 
may be opened for trading on BOX when the Exchange deems it 
necessary to maintain an orderly market, to meet customer demand or 
when the market price of the underlying security moves substantially 
from the exercise price or prices of the series already opened. Any 
additional strike prices listed by BOX shall be within thirty 
percent (30%) above or below the current price of the underlying 
security. BOX may also open additional strike prices of Short Term 
Option Series that are more than 30% above or below the current 
price of the underlying security provided that demonstrated customer 
interest exists for such series, as expressed by institutional, 
corporate or individual customers or their brokers (market-makers 
trading for their own account shall not be considered when 
determining customer interest under this provision). Supplementary 
Material .07 to Chapter IV, Section 6 and Supplementary Material .02 
to Chapter XIV, Section 10.
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    The principal reason for the proposed expansion to the number of 
classes is customer demand for adding, or not removing, short term 
option classes from the Weeklys Program. BOX understands that other 
options exchanges, in order to not exceed the fifteen-option class 
restriction, from time to time, have had to discontinue trading one 
short term option class before beginning to trade other option classes 
within their Weeklys Program. BOX believes this has negatively impacted 
investors and traders, particularly retail public customers. BOX 
understands that market participants have also requested that other 
options exchanges add additional classes to the Weeklys Program. BOX 
notes that the Weeklys Program has been well received by market 
participants, in particular by retail investors. BOX believes a modest 
increase to the number of classes that may participate in the Weeklys 
Program, such as the one proposed herein, will permit the options 
exchanges to meet increased customer demand and provide market 
participants with the ability to hedge in a greater number of option 
classes.
    The principal reason for the proposed expansion to the number of 
series is market demand for additional series in Weeklys Options 
classes in which the maximum number of series (20) has already been 
reached. Specifically, BOX has observed increased demand for more 
series when market moving events, such as corporate events and large 
price swings, have occurred during the life span of an affected Weeklys 
Program class. Currently, in order to be able to respond to market 
demand, BOX is forced to delete or delist certain series in order to 
make room for more in demand series.\7\ BOX finds this method to be 
problematic for two reasons.
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    \7\ BOX deletes series with no open interest and delists series 
with open interest if those series are open for trading on another 
exchange.
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    First, BOX has received requests to keep series that it intends to 
delete/delist to make room for more in demand series. While market 
participants may access other markets for the deleted/delisted series, 
BOX would prefer that market participants trade these series at BOX. 
Second, this method can lead to competitive disadvantages among 
exchanges. If one exchange is actively responding to market demand by 
deleting/delisting and adding series, and another exchange is the last 
to list the less desirable series with open interest, this last 
exchange is stuck with those series and unable to list the in demand 
series (because to do so would result in more than 20 series being 
listed on that exchange). As a result, the maximum number of series per 
class of options that participates in the Program should be increased 
to 30 so that exchanges can list the full panoply of series that other 
exchange list and which the market demands.
    To affect[sic] this change, the Exchange is proposing to amend the 
BOX rules to limit the initial number of series that may be opened for 
trading to 20 series and to limit the number of additional series that 
may be opened for trading to 10 series.
    With regard to the impact of this proposal on system capacity, BOX 
has analyzed its capacity and represents that it and the Options Price 
Reporting Authority (``OPRA'') have the necessary systems capacity to 
handle the potential additional traffic associated with trading of an 
expanded number of classes and series in the Weeklys Program.
    BOX believes that the Weeklys 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. BOX further believes this proposed rule change will provide 
investors with additional short term option classes and series for 
investment, trading, and risk management purposes.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Securities Exchange Act of 1934 \8\ (the 
``Act'') in general, and furthers the objectives of Section 6(b)(5) of 
the Act \9\ in particular, in that it is designed to promote just and 
equitable principles of trade, 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. The Exchange 
believes that expanding the current short term options program will 
result in a continuing benefit to investors by giving them more 
flexibility to closely tailor their investment decisions and hedging 
decisions in greater number of securities. The Exchange believes that 
expanding the current program would provide the investing public and 
other market participants increased opportunities because an expanded 
program would provide market participants additional opportunities to 
hedge their investment thus allowing these investors to better manage 
their risk exposure. While the expansion of the Weeklys Program will 
generate additional quote traffic, the Exchange does not believe that 
this increased traffic will become unmanageable since the proposal 
remains limited to a fixed number of classes. Further, the Exchange 
does not believe that the proposed rule change will result in a 
material proliferation of additional series because it is limited to a 
fixed number of series per class and the Exchange does not believe that 
the additional price points will result in fractured liquidity. 
Moreover, the Exchange believes the proposed rule change would benefit 
investors by giving them more flexibility to closely tailor their 
investment decisions in a greater number of securities.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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

[[Page 72492]]

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

    No written comments were either solicited or received.

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 \10\ and Rule 19b-4(f)(6) thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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 
Exchange has satisfied this requirement.
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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.\12\ 
Therefore, the Commission designates the proposal operative upon 
filing.\13\
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    \12\ See Securities Exchange Act Release No. 65771 (November 17, 
2011) (SR-ISE-2011-60) (order approving expansion of Short Term 
Option Program).
    \13\ 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 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-BX-2011-075 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-2011-075. 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 
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-2011-075 and should be 
submitted on or before December 14, 2011.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-30197 Filed 11-22-11; 8:45 am]
BILLING CODE 8011-01-P