Document ID: SEC-2011-1682-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2011-11-02T04:00Z

[Federal Register Volume 76, Number 212 (Wednesday, November 2, 2011)]
[Notices]
[Pages 67781-67783]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-28347]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65642; File No. SR-BX-2011-072]

Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the BOX Trading Rules To Retire the Additional Expiration Months Pilot 
Program and To Harmonize the Rules Regarding Listing Expirations With 
the Existing Rules of Other Exchanges

October 27, 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 October 19, 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 retire the Additional Expiration 
Months Pilot Program and to harmonize the BOX Trading Rules regarding 
listing expirations with the existing rules of other exchanges.

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 the proposed rule change is to retire the Additional 
Expiration Months Pilot Program (``Pilot Program'') and to amend the 
BOX Trading Rules regarding listing expirations. This filing is based 
on the existing rules of other options exchanges.\4\
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    \4\ See Chicago Board Options Exchange, Incorporated (``CBOE'') 
Rule 5.5 (Series of Options Contracts Open for Trading, NASDAQ 
Options Market (``NOM'') Chapter IV, Section 6 (Series of Options 
Contracts Open for Trading) and NASDAQ OMX PHLX, LLC (``PHLX'') Rule 
1012 (Series of Options Open for Trading). See also Securities 
Exchange Act Release Nos. 65241 (August 31, 2011), 76 FR 55249 
(September 7, 2011) (SR-CBOE-2011-080); 57478 (March 12, 2008), 73 
FR 14521 (March 18, 2008) (SR-NASDAQ-2007-004 and SR-NASDAQ-2007-
080); and 63700 (January 11, 2011) 76 FR 2931 (January18, 2011) (SR-
PHLX-2011-04). The PHLX filing was based on NOM's existing rules.
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    Pursuant to Chapter IV, Section 6(e) of the BOX Trading Rules, the 
Exchange usually will open four expiration months for each class of 
options open for trading on BOX: the first two being the two nearest 
months, regardless of the quarterly cycle on which that class trades; 
the third and fourth being the next two months of the quarterly cycle 
previously designated by the Exchange for that specific class.
    For competitive reasons, in 2010, a Pilot Program was established 
pursuant to which BOX could list up to an additional two expiration 
months, for a total of six expiration months for each class of options 
open for trading on BOX.\5\ The filing to establish the Pilot Program 
was substantially similar in all material respects to a proposal of the 
International Securities Exchange, LLC (``ISE'').\6\
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    \5\ See Securities Exchange Act Release No. 63321 (November 16, 
2010), 75 FR 71163 (November 22, 2010) (SR-BX-2010-077).
    \6\ See Securities Exchange Act Release No. 63104 (October 14, 
2010), 75 FR 64773 (October 20, 2010) (SR-ISE-2010-91).
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    After ISE and BOX established their respective Pilot Programs, ISE 
submitted a filing in response to a PHLX filing regarding the listing 
of expirations.\7\ In the PHLX filing, PHLX amended its rules that so 
that it could open ``at least one expiration month'' for each class of 
standard options open for trading on PHLX.\8\ PHLX stated in its filing 
that this amendment was ``based directly on the recently approved rules 
of another options exchange, namely Chapter IV, Sections 6 and 8'' of 
NOM. Since PHLX's rules did not hard code an upper limit on the maximum 
number of expirations that may be listed per class, ISE believed that 
PHLX (and NOM) had the ability to list expirations that ISE would not 
be able to currently list under its rules. As a result, ISE amended its 
rules by adding new Supplementary Material .10 to ISE Rule 504 and 
Supplementary Material to .04 to ISE Rule 2009 to permit ISE to list 
additional expiration months on options classes opened for trading on 
ISE if such expiration months are opened for trading on at least one 
other national securities exchange.\9\
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    \7\ See Securities Exchange Act Release No. 64343 (April 26, 
2011), 76 FR 24546 (May 2, 2011) (SR-ISE-2011-26).
    \8\ See id. at 24546-24547.
    \9\ See id. at 24547.
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    Because BOX had adopted a Pilot Program similar to ISE's, BOX 
adopted new Supplementary Material .09 to Chapter IV, Section 6 and 
Supplementary Material .03 to Chapter XIV, Section 10 of the BOX 
Trading Rules that permits BOX to list additional expiration months on 
options classes opened for trading on BOX if such expiration months are 
opened for trading on at least one other national securities 
exchange.\10\
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    \10\ See Securities Exchange Act Release No. 64570 (May 31, 
2011), 76 FR 32383 (June 6, 2011) (SR-BX-2011-029).

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[[Page 67782]]

    Now that BOX has the ability to match the expiration listings of 
other exchanges \11\ (that may exceed six expirations and may occur on 
a regular basis) the Exchange believes that the Pilot Program is no 
longer necessary and is proposing to retire it. To affect this change, 
the Exchange is proposing to delete Supplementary Material .08 to 
Chapter IV, Section 6 that sets forth the terms of the Pilot Program, 
which is currently scheduled to expire on October 31, 2011.
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    \11\ See Supplementary Material .09 to Chapter IV, Section 6 of 
the BOX Rules.
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    In addition, BOX's ability to match the expirations listed by other 
exchanges is set forth in Supplementary Material .09 to Chapter IV, 
Section 6. This provision, however, only provides BOX with the ability 
to match expirations initiated by other options exchanges. To encourage 
competition and to place BOX on a level playing field, BOX should have 
the same ability as PHLX and NOM to initiate expirations. Therefore, as 
proposed the BOX Trading Rules will be harmonized with the rules of 
PHLX and NOM by clarifying that BOX will open at least one expiration 
month and one series of for each class open for trading on the 
Exchange. To affect this change, the Exchange is proposing to amend the 
text of Chapter IV, Section 6(b) of the BOX Trading Rules to track the 
rule text of NOM Chapter IV, Section 6 and PHLX Rule 1012, and to 
delete Section 6(e) in Chapter IV of the BOX Rules.
    BOX believes the proposed rule change is proper, and indeed 
necessary, in light of the need to have rules that do not put BOX at a 
competitive disadvantage. This proposal puts BOX in the same position 
as PHLX and NOM and provides BOX with the same ability to initiate and 
match identical expirations across exchanges for products that are 
multiply-listed and fungible with one another. BOX believes that the 
proposed rule change should encourage competition and be beneficial to 
traders and market participants by providing them with a means to trade 
on BOX securities that are initiated by BOX and listed and traded on 
other exchanges.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') \12\ and the rules 
and regulations thereunder and, in particular, the requirements of 
Section 6(b) of the Act.\13\ Specifically, the Exchange believes the 
proposed rule change is consistent with the Section 6(b)(5) \14\ 
requirements 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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    \12\ 15 U.S.C. 78s(b)(1).
    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    In particular, the proposed rule change will permit BOX to 
accommodate requests made by BOX Options Participants and other market 
participants to list additional expiration months and thus encourage 
competition without harming investors or the public interest.

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

    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 \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 
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 will allow BOX to initiate the listing of 
series with the same range of expiration months as are available to its 
competitor exchanges, subject to certain conditions. Therefore, the 
Commission designates the proposal operative upon filing.\17\
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    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rules 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-2011-072 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-2011-072. 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 such filing

[[Page 67783]]

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 publicly available. All submissions should refer to File Number 
SR-BX-2011-072 and should be submitted on or before November 23, 2011.
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    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-28347 Filed 11-1-11; 8:45 am]
BILLING CODE 8011-01-P